Famfa Oil Limited V. Hon. Attorney-general of the Federation & Anor (2007)
LawGlobal-Hub Lead Judgment Report
UMARU ABDULLAHI. J.C.A.
This appeal is against the judgment of the Federal High Court, by – Adah, J. sitting at Abuja, delivered on 31st May, 2006. The facts of the case are clear and are not in dispute. Put briefly, they are as follows:-
In May, 1993, the Appellant applied for an allocation of an Oil Prospecting License (OPL). The Appellant made all necessary payments in this respect and the license was granted accordingly. This license, will henceforth he referred to as OPL 216.
In September, 1996, the Appellant entered into an agreement with STAR DEEP WATER PETROLEUM LIMITED(STAR DEEP) as its technical adviser and at the same time transfer 40% interest in OPL 216 to STAR DEEP also later assigned 8% of its 40% interest in OPL 216 to another company called PETROBRAS 8% participation of interest in OPL 216.
In March, 2003, the Appellant applied to the Minister of the Petroleum Resources for conversion of OPL 216 to Oil Mining Lease (OML). The application for the conversion was granted in 2004. The result of this was that OPL 216 was converted to become OML 127.
I think it is important to mention that, before the application to convert OPL 216 to OML 127, the Appellant had to go to the Federal High Court and instituted an action against the 2nd Respondent. What triggered this suit arose from a letter written by the Ministry of Petroleum Resources dated 23rd March, 2000, informing the Appellant that the Government had acquired some 40% interest in OPL 216.
For the: purpose of clarity, I shall set out most relevant portion of the letter. It reads as follows:-
“The Chairman,
Famfa Oil Limited,
290A Ajose Adeogun Street,
P. O. Box 70681,
Victoria bland,
Lagos.
Dear Sir,
RE: ACQUIS1TION OF GOVERNMENT INTEREST IN OPL 216
The President and Commander-in-Chief of the Federal Republic of Nigeria has directed that Government acquire 40% participating interest in OPL 216 allocated to famfa Oil Limited, in accordance with the provisions of Paragraph 2 (iii) of the allocation letter reference PLBAL/3750/Vol.4/433 dated 10th August, 1993.
The Government’s 40% interest is inverted in NNPC, which shall, on conversion to OML be the operator.
You are to note that by this directive, the new participating interest On the block shall be as follows:-
NNPC 40% (OPERATOR)
Famfa Oil Ltd. 20%
Star Deep Water Petroleum Ltd. 32%
Petro Bras Nig Ltd. 8%
You are therefore required to meet with NNPC to expeditiously conclude the appropriate agreement reflecting the new arrangement.”
The Appellant was not happy with this development and he challenged the decision in Court. At the Federal High Court, the Appellant sought for two reliefs as follows:-
“(1) A declaration that the purported acquisition by the Federal Government of 40% out of Famfa’s 60% interest in the Claimants Oil Producing License (OPL 216) is illegal, unconstitutional and void and of no legal consequence whatsoever, and as such, is not capable of divesting from Famfa the said 40% of its Participating Interest in OPL 216 or any interest whatsoever thereon and cannot confer any right or interest therein in the Nigerian National Petroleum Corporation.
(2) An Order of perpetual injunction restraining the Nigerian National Petroleum Corporation from claiming or exercising any right in or over the present interest of the claimant in the said OPL 216 of any portion thereof.”
At the end of the trial, the learned trial Judge, Nyako, .J. found in favour of the Appellant as follows:-
“… I must find that the acquisition of the Plaintiff 40% interest is a breach of the agreement between the parties. An Oil Prospecting License is different from an Oil Mining License and I shall discountenance all arguments in the regard. The action of the Government is premature and preemptive, thus illegal, null and void and it is consequently set aside. And the second relief consequently follows the 1st already granted.”
In January, 2005, the Department of Petroleum Resources, again wrote a letter to Appellant to acquire 5/6 of the Appellant’s interest in OML 127. Not long after that the Department of Petroleum Resources again on 19th of April, 2005 wrote another letter to the Appellant, this time acquiring 50% of the Appellant’s interest in OML 127. On 22nd April, the Appellant cause a notice of intention to commence legal proceedings. The notice was served on the 2nd Respondent.
Prior to the two letters dated 17th January, 2005 and 19th April, 2005, the Appellant received no information or in anyway brought to the attention of the Appellant the reason or reasons for the acquisition of any part of the interest of the Appellant in OML 127.
Before the acquisition order, the Appellant and his technical partners, STAR DEEP and PETROBRAS had exerted a lot of manpower and thousands of millions of US Dollars on the exploration of the field. The Appellant was never offered nor paid any compensation for the purported acquisition. The 2nd Respondent has since the purported acquisition been carrying out exploration and production activities on the Block not by itself but through the Technical Partners of the Appellant. That no negotiation on the terms and conditions of the said arbitrary acquisition was ever carried out with the Appellant.
Arising from this arbitrary acquisition carried by the 2nd Respondent, The Appellant went to Court. By way of Originating Summons, the Appellant sought for the determination of the following questions:-
“1. A declaration that the President, Vice-President or Officers in the Public Service of the Federation CANNOT grant any Oil Prospecting License (OPL) or any Oil Mining Lease (OML) or any Interest whatsoever in respect of any “minerals, mineral oils and natural gas in, under or upon the territorial waters and Exclusive Economic zone of Nigeria” to any person or person except under and in accordance with the provision of the Petroleum Act CAP P. 10 of the Laws of the Federal Republic of Nigeria, more especially Section 2(1)(a)(b) and (c) as well as Section 2(3).
2. A declaration that by virtue of paragraph 8 of the First Schedule To the Petroleum Act, the first Respondent cannot grant an Oil Mining Lease to any other person or person EXCEPT the HOLDEN OF AN OIL PROSPECTING LINCESE.
3. A declaration that the President, vice-President or Officers in the Public Service of the federation CANNOT acquire any interest in an Oil prospectecting License (OPL) or Oil Mining License (OML) except under and in accordance with the provision of:-
a. Paragraph 35 of the First Schedule to the Petroleum Act;
b. section 44(1) of the constitution of the federal Republic of Nigeria.
4. A declaration that the purported acquisition of 50% of the Applicant’s interest whatsoever in OML 127 in as much as it was not done in compliance with the provision of the law and constitution as stated above is illegal, unconstitutional, null and void cannot confer any interest whatsoever in OML 127 in the second Respondent (that is due process of the law must be followed).
5. A perpetual injunction restraining the second Respondent, it, assigns, servants, privies, subsidiaries, whomsoever, howsoever, whensoever from exercising any right in the said OML 127 or any part or portion thereof.”
The matter went into full trial, and at the end of the trial, the learned trial Judge dismissed the claims of the Appellant. The Appellant was not happy, and he appealed against the decision. 14 grounds of appeal were filed, which were condensed into four issues for determination. The four issues read as follows:
“C1. Whether the Learned trial Judge rightly held that the acquisition of the Appellant’s interest in OML 127 is valid, lawful and in accordance with statute?
C2. Whether the learned trial Judge rightly held that the acquisitition of the Appellant’s interest in OML 127 is constitutional?
C3. Whether the purported acquisition of the Appellant’s interest in OML 127 has any basis in negotiations and contract?
C4. Whether the summation and evaluation of evidence and findings of fact and inferences by learned trail Judge were not perverse?”
Before I go into the issues for determination, I will quickly deal with a preliminary objection raised by the learned counsel for the 2nd Respondent, complaining about proliferation of issues relating to the grounds of Appeal filed.
Learned counsel referred to some authorities on the point such as AGBETOBA vs. LSCE (1991) 4 NWLR(PI. 188) 664 at 682; EDEM vs. CANON BALL LTD. (1998) 6 NWLR (PI. 553) 298 at 307, in which the Supreme Court frown at the practice of proliferation or splitting of ground of appeal into more than one issue.
I examined the grounds of appeal as well as the issues for determination in this appeal. I have no difficulty appreciating the issues for determination identified by the Appellant. Even the learned counsel was able to make clear submission on the issue, which in fact the learned counsel found convenient to consolidate them all into one single issue.
I find no merit in the preliminary objection and I accordingly dismiss it.
ISSUE CI.
The Appellant started his argument by submitting that the learned trial Judge was wrong to hold that the acquisition of the Appellant’s interest in OML 127 was done in compliance with the provision of the law, that is Petroleum Act and the subsidiary Regulations under it. That the learned Judge cannot in anyway see anything that is contrary to the provisions of the 1999 Constitution in this case.
Other findings made by the learned trial Judge also include the following:-
1. That the Minister can by virtue of paragraph 8 of the 1st Schedule to the Petroleum Act grant an Oil Mining Lease to the holder of an Oil Prospecting License who has complied with the terms of the License and the Law, Nothing however stops the Minister or the Government from sharing in Oil Mining Lease if that is allowed by their terms of contract and the law as in the instant case.
2. That the Minister or the Defendants in this case can under Paragraph 35 of the First Schedule to the Petroleum Act, and Section 44(1) of the Constitution acquire any interest in an Oil Prospecting License (OPL) or Oil Mining Lease (GML), but it must be in line with the provisions of the law. (Underlining mine).
3. The whole transaction has, to do with the arrangement of the parties over OPL 126 (sic) 216 and OML 217 (sic) 127. The steps taken by the Defendants to acquire 50% of the interest of the Plaintiff in OML 217 (sic) 127 no doubt may apparently be very harsh and painful, but it is within the contemplation of the agreement of the parties in this case.
These are various findings of the learned trial Judge the Appellant found inappropriate.
Learned counsel for Appellant submitted that it is a fundamental principle of law and high public policy that the taking of property must be on the basis of payment of compensation. Thus, to compulsorily acquire property, must be strictly in accordance with Section 44 of the 1999 Constitution, and any enabling Statute in that regard.
It is the contention of the learned counsel for Appellant that the Petroleum Act Cap. 350, Laws of the Federation of Nigeria 1990 is not a law on compulsory acquisition, and none of its provisions provides for that. This Act is now Cap. 10, Laws of the Federation of Nigeria, 2004 which came into force on the 31st day of December, 2002 with commencement date of 27th November, 1969, before the institution of this action, Be that as it may, it is further the contention of the learned counsel for the Appellant that, what the law provides or allows is participation as opposed to compulsory acquisition. Learned counsel went into long discussion as to what constitutes acquisition and participation and drew conclusion that Participation implies sharing, an element of knowledge and consensus, whereas, acquisition connotes unilateral act as opposed to a joint action, it also connotes expropriation, seizure, divestment etc. That, in this case, the Government acquired rather than participated in OML 127.
Learned counsel submitted that the learned trial Judge erred in law in holding that the action of the Respondents was in compliance with Cap, 350, when in fact, Cap. 350 is no basis for acquisition of interest as opposed to participation in an OML 127, particularly having regard to the provision of Section 44 of 1999 Constitution.
Learned counsel for Appellant went on to submit that the learned trial Judge correctly referred to the provisions of paragraph 35 of Cap. 350, but Failed to apply two conditions laid down by the Section, and even the third One he applied, he did wrongly. Learned counsel maintained that three conditions are inherent in paragraph 35 of Schedule 1, and the three conditions must co-exist and the absence of anyone of them will undermine the validity of any form of acquisition purportedly carried out in compliance with paragraph 35.
These three conditions are:-
I. Public interest.
2. The special terms and conditions imposed on the Lease, which must be consistent with the law Cap. 350.
3. Participation by the Federal Govemment must be on terms to be negotiated between the Minister and the applicant for the Lease.
Learned counsel cited the case of ATTORNEY-GERNAL OF THE FEDERATION v. GUARDIAN NEWSPAPERS (1999) 9 NWLR (Pt.618) 187, which stated the law that where an authority is empowered to make a law, or do a thing in public interest or otherwise, if the condition to the exercise of the power is not met, the exercise will be an act in vain, liable to being set aside as a nullity.
I think it is pertinent at this juncture to set out the provisions of paragraph 35, Schedule 1 of Cap. 350, 1990 or Cap.10, 2004 Laws of the Federation of Nigeria. The provisions of the paragraph is exactly the same word for word in each of the Chapters. It provides as follows:-
“35. If he consider it to be in the public interest, the Minister may impose on a license or lease to which this Schedule applies special terms and conditions not inconsistent with this Act including (without prejudice to generality of the foregoing) terms and conditions as to:
a. participation by the Federal Government in the venture to which the license or lease relates, on terms to be negotiated between the Minister and the applicant for the license or lease; and
b. special provision applying to any natural gas discovered, which provision shall include-
(i) The right of the Federal Government to take natural gas production with crude oil by licensee or leasee free of cost at the flare or at an agreed cost and without payment of royalty.
(ii) ……………………………………….
(iii) ………………………………………..”
It is the contention of the Appellant that no public interest of any form is shown by the Respondents in the process of acquisition of the Appellant’s interest. Learned counsel submitted that the law requires that specific and unequivocal details must be spelt out concerning the public purpose in the notice of acquisition, if it is not done the acquisition shall be void. The case of A. G. BENDEL vs. AIDEYAN (1989) 4 NWLR (Pt. 118) 672 was relied on. Also relying on the case of BANIRE VS.LSDPC 5 NWLR (Pt. 243) 620.
Learned counsel submitted, that where a property is compulsorily acquired for public purpose, the property must be for public use and must be put into public use. If a Government agency or authority acquires compulsorily private propertyy purportedly for public use, and proceed to use it for a private purpose, is to say the least, a gross abuse of its powers and a public scandal. To use the property for a purpose for which the private owner could have used it or was using it, is clearly a private use of the property. In this case, the 2nd Respondent has clearly indicated in paragraphs 33 – 35 of supporting affidavit that since the purported acquisition has been carrying out exploration and production services on the block not by itself, but through the Technical Partners of the Appellant.
Learned counsel went further to maintain that 2nd Respondent did not give any notice to the Appellant or reasons for the acquisition, thereby denying the Appellant any opportunity to make any representation or to correct or dispute any relevant action prejudicial to his situation or interest. See DE VERTENIL vs. KNAGGS (1918) A. C. 557 at 560. It is also the law that giving full particulars of grounds of revocation is required to be given, even if the enabling statute does not state so expressly. See HOPKINS v. SMETHWICK LOCAL BOARD OF HEALTH (1890) 24 Q. B.D. 712; SMITH vs. THE QUEEN (1878) L. R. 3 APP CASES 614.
In this case, from the circumstances surrounding the acquisition and riding on the back of paragraphs D11 – D22, the failure, neglect or decline of the 2nd Respondent to give the Appellant an opportunity to state its own case is an infringement of its right of fair hearing as enshrined in Section 36 of the 1999 Constitution.
The learned counsel for Appellant further maintained that whatever Special terms and conditions imposed on the lease must not be inconsistent with paragraph 35 of Cap.10 LFN (Capt.350) 2004; as a matter of fact by the new agreement entered in respect of OML 127, no special terms and conditions are imposed, and no terms or conditions were ever negotiated with the Appellant by the Minister for the grant of the lease, therefore the sudden compulsory acquisition of 50% of the Appellant’s interest in OML 127 is arbitrary and in contravention of the provisions of paragraph 35 of the first schedule of the Act; therefore null and void.
Learned counsel submitted that the learned trial Judge was totally wrong to rely on the conditions for the grant of OPL 216 and used it in relation to OML 127.
With regard to the appropriate time of negotiation with the Minister, learned counsel for Appellant contended that commonsense and logic demands that in granting the license or lease the exercise relates to future conduct since the acquisition could not materialize before the grant. It is also the submission of the Appellant that the subsidiary Legislation i. e. the Back-in-Rights Regulations which the trial Judge accepted as valid is clearly inconsistent with the provisions of the principal law e.g. paragraph 35 or Cap 10 LFN 2004; since paragraph 35 clearly made provision for negotiations, while the Regulation only talk of acquisition at the whims and caprices of the Minister. This also derogates from the principles of natural justice, equity and good conscience, which Courts of law are enjoined to ensure. See WILLIAMS VS. MAJEKODUNMI (NO.3 (1962)1 ALL NLR (Pt 3) 413; DOHERTY v TAFAWA BALEWA (1961) ALL N.L.R. 604 FSC.
It is the contention of the learned counsel for Appellant, that apart from being inconsistent with paragraph 35 of the law; the application of the Regulation in the circumstances of this case clearly overreached the decision of Nyako J. which clearly prohibited the 2nd Respondent from compulsory acquisition of 40% of the Appellant’s interest in OPL 216. The action of the 2nd Respondent in relation to OML 127 is clearly a retaliation against the Appellant for the result of that suit. The law does not allow the Executive to override or hand down judgments to the detriment of a citizen. See A.G, ABIA VS. A.G. FEDERATION (2003)4 NWLR (Pt.809)124.
Finally learned counsel for Appellant contended that the action of the 2nd Respondent is discriminatory against the particular interests of the Appellant, which was targeted for acquisition, since the interest of his Technical partners were left intact and untouched. The learned counsel submitted that being a discriminatory action, even if as found by the trial Judge is covered by Section 44 (2), of the 1999 Constitution, nonetheless the provision of Section 42, of the same constitution would render it unconstitutional and void. See ANZAKU VS. GOV. NASARAWA STATE (2005) NWLR (Pt. 919) 448, which stated the law that any act that is discriminatory is null and void.
It is the submission of the learned counsel, that the action of the 2nd Respondent does not come within the proviso of Section 44(2) of the 1999 Constitution, but clearly in derogation of Sections 42 and 44(1) of the same Constitution.
These Section provide as follows:-
“42(1) A citizen of Nigeria of a particular community, ethnic group, place of origin, sex, religion or political opinion shall not, by reason only that he is such a person.
(a) be subjected either expressly by, or in the practical application of, any law in force in Nigeria or any
executives or administrative action of the Government, to disabilities or restrictions to which citizens of Nigeria of other communities, ethnic groups, places of origin, sex, religions or political opinions are not made subject; or
(b) be accorded either expressly by, or in the practical application of, any law in force in Nigeria or any such executive or administrative action, any privilege or advantage that is not accorded to citizens of Nigeria of other communities, ethnic groups, places of origin, sex, religion or political opinions.
(2) No citizen of Nigeria shall be subjected to any disability or deprivation merely by reason of the circumstance of his birth.
(3) Nothing in subsection (1) of his section shall invalidate any law by reason only that the law imposes restrictions with respect to the appointment of any person to any office under the State or as a member of the armed forces of the Federation or a member of the Nigeria Police Force or to an office in the service of a body corporate established directly by any law in force in Nigeria.
43. Subject to the provision of this Constitution, every citizen of Nigeria shall have the right to acquire and own immovable property anywhere in Nigeria.
44. (1) no moveable property or any property shall be taken possession of compulsory and no right over or interest in such property shall be acquired compulsorily in any part of Nigeria except in the manner and for the purpose prescribed by a law that, among other things.
(a) requires the prompt payment of compensation therefore; and
(b) gives to any person claiming such compensation a right of access for the determination of his interest in the property and the amount of compensation to a court of law or tribunal or body having jurisdiction in that part of Nigeria.
(2) Nothing in subsection (1) of this section shall be construed as affecting any general law.
(a) for the imposition or enforcement of any tax, rates or duty;
(b) for the imposition of penalties or forfeitures for the breach of any law, whether under civil process or after conviction for an offence;
(c) relating to lease, tenancies, mortgages, charges, bills of sale or any other right or obligation arising out of contracts.”
I think it is now time to consider the submission of learned counsel for 1st and 2nd Respondents.
Both learned counsel for 1st and 2nd Respondent, identified one similar single issues for determination in their respective briefs of argument.
Consequently in many respects, their respective submissions overlap with one another.
The single issue they identified read as follows:-
“Whether having regards to the entire case, the trial Court was right in holding that the Federal Government’s acquisition or taking up of 50% of the Appellant’s interest in OML 127 was done in compliance with the provisions of the law and the Constitution.”
Learned counsel for 1st Respondent:
After reviewing the facts of the case, which are not in dispute as set out in the Appellant’s brief, Learned counsel conceded that the Federal High Court Nyako J. ruled that the Government was entitled to a participating interest in OML, though not in the OPL It is the submission of the learned counsel that pursuant to the provision of section 9 of the Petroleum Act, the Minister was empowered to make regulation providing generally for matters relating to licenses and lease granted under the Act, that was how Back-in-Rights Regulation 2003 emerged. Learned counsel particularly referred to Regulations
2(1) and (2), which reads as follows:-
“2(1) Where an allocation of a deep water block referred to in paragraph 1 of these Regulations include a reservation by the Federal government of a right to a participating interest in an oil mining lease derived from an oil prospecting license, the conditions specified in these regulations shall apply.
(2) the federal government shall exercise its right to participation in such oil mining lease by acquiring five sixth of the allotee’s interest in the Oil Prospecting License (OPL) and Oil Mining Lease (OML) (round up to the nearest whole percentage point of total interest in the deep water block) under terms and conditions as may be determined from to time, by the federal government.”
It is the submission of learned counsel that the acquisition of 50% of the Appellant’s interest in OML 127 was in accord with the laws and in accordance with the agreement of the parties.
Learned counsel made reference to the case of F.G.N. vs. ZEBRA ENERGY LTD (2002)18 NWLR (pt.718) in which the Supreme Court stated that Oil Prospecting Licenses and Oil Mining Leases were statutory contracts and therefore subject to the provisions of statutes.
Learned counsel referred to the provision of paragraph 8 of the first schedule to the Petroleum Act which provides as follows:-
“8 An Oil Mining Lease may be granted only to the holder of an Oil Prospecting License who has
(a) Satisfied all the condition imposed on the license or otherwise on him by this Act, and
(b) Discovered Oil in commercial quantities
Learned counsel contended that this has granted the Minister a wide discretionary power.
Learned counsel also referred to a provision in Back-in-Right Regulations 2003, which in relation to OPL 216 set out some special terms and conditions as follows:-
“… the allocated block would be operated on a sole risk basis but with the understanding that the government reserves the right to a participating interest at any time in the life of any subsequent Oil Mining Lease when it so wishes.”
Learned counsel contended that, with these provisions at hand, it follows that the letter dated 27th January, 2005 and the one dated 21st (sic) 19th April, 2005 written to the Appellant by the Ministry of Petroleum Resources was not to alter its earlier position and that the Back-in-Right regulations were not intended to overreach the Appellant and either was it an executive legislation, the legislation should be held as good law.
I can not help mentioning at this stage that, I found it curious that the learned counsel for 1st Respondent clearly avoided bringing in the provision of paragraph 35 of the Petroleum Act which is the one in issue, but only made reference and discussed paragraph 34 of the same Act, which was not in contention by the Appellant. In other words the learned counsel for 1st Respondent is completely silent on the provision of paragraph 35 of the Act.
Learned counsel finally submitted that the provision of Section 44(1) of the Constitution 1999 does not apply to the case of the Appellant and urges that the appeal be dismissed.
I think it will also be better to set out the submissions of learned counsel for 2nd Respondent, where the substance is different from the one made by learned counsel for 1st Respondent, because, as I mentioned earlier, the submissions of both overlapped in many respects.
Learned counsel for 2nd Respondent
Learned counsel also started by setting out the facts of the case, which are not in dispute including the processes followed for the acquisition which made the Appellant to go to Court. Learned counsel in the same way as the counsel for 1st Respondent maintained that the acquisition was done according to law. In the same pattern with the counsel for 1st Respondent briefly touched on the provisions of paragraph 35 of the Petroleum Act Cap 10 of 2004 laws of the Federation, conceded that it is the applicable law but added that it provided for terms and conditions as to the participation by the Federal Government in the venture to which license or lease on terms to be negotiated between the Minister and the applicant for the license, or lease.
Learned counsel contended however that the point of negotiation must be at the point of application for a license or lease. It is the submission of the learned counsel that it was at the stage of applying for the OPL 216 that the Appellant as an applicant ought to have negotiated the terms of the license, that it is now too late in the day to complain that the conditions for granting a license has not been complied with, particularly, as the said OPL and it terms and conditions were never in issue in the instant case.
I must point out at this stage that this submission of learned counsel for 2nd Respondent is radically different and infact it contradicted the stand of the 1st Respondent, whose position is that both transactions in the application of license OPL 216 is a continuation of the lease granted in OML 127. The only small point they both agreed on is that the negotiation envisaged by the law should apply only to Appellant and not to some one who already had an approval, like the Appellant.
The other point, 1 would like to clarify at this stage is that by trying to base their arguments on license 216 to justify their position that the Appellant could not and should not talk of negotiation is quite misplaced and misconvieved. The issue of liccnse 216 was decided by Federal High Court, Nyako J. The Judge clearly said that the 2nd Respondent could not and should not have acquired the 40% interest of the Appellant in that venture and declared the acquisition null and void. There has never been any appeal against that decision.
The portion of the decision that seemed to confer some rights to the Respondents is the portion which states as follows;-
“Having found that the Government is only entitled to a participating interest in an Oil Mining License (sic) lease and not an Oil Prospecting License, I must find that the acquisition of the plaintiffs 40% is a breach of the agreement between the parties. An Oil Prospecting License is different from an Oil Mining License (sic) Lease … The action of the Government is premature and pe-emptive, thus illegal, null and void and it is consequently set aside.”
It is the general consensus between all the parties including the Appellant that the Government is entitled to a participating interest in the Oil Mining Lease such as the one held by the Appellant, so long as it is done in accordance with due process and the law governing the transaction.
The position of the Appellant is that due process and the law governing the transaction has not been followed. That the so called Regulation on which the Respondents put so much reliance is not in conformity with the provisions of the principal law, namely paragraph 35 of the Petroleum Act 2004. At the expense of repetition but for the purpose of clarity, I shall state once again the provisions of paragraph 35, 1st schedule of the Petroleum Act, Cap 10 2004 LFN. It reads:-
“35. If he considers it to be in the public interest, the Minister may impose on a license or lease to which this schedule applies special terms and conditions not inconsistent with this Act including (without prejudice to the generality or the foregoing) terms and conditions as to.
(a) participation by the Federal Government in the venture to which the license or lease relates, on terms to be negotiated between the Minister and the applicant for license or lease: and…”
(underlining provided).”
The Respondents centered all their case and submission on what is called the Back-in-Right Regulation 2003. The relevant portions they relied on are reproduced again for clarity.
“2(1) Where an allocation of a deep water block referred to in paragraph I of these Regulations include a reservation by the Federal Government of a right to a participating interest in an Oil Mining Lease derived from an Oil prospecting License, the conditions specified in these Regulations shall apply:
The Federal Government shall exercise its rights to participate in such Oil Mining Lease by acquiring five sixth of the allottee’s interest in the relevant Oil Prospecting License and Oil Mining Lease (rounded up to the nearest whole percentage point of total interest in the deep water block) under such terms and conditions as may be determined, from time to time, by the Federal Government.”
it is clear that these Regulations made no reference to negotiation quite in contradiction to the principal law, in paragraph 35 of Cap 10.
This is where I find the complaint of the Appellant to be valid. It is the law that subsidiary legislations must conform with the principal law which provided the source of their existence.
Against this background, to bring home the point made by the Appellant in his complaint that the action of the Respondents is arbitrary and without any due process I reproduce the contents of the two letter, written to the Appellant by the 2n Respondent.
The first letter is dated January, 27th 2005. The relevant portion reads as follows:-
“Pursuant to the Court judgment and in accordance with the provisions of the Back-in-Right Regulation of 2003, we wish to notify you that five-sixth of your equity has been taken over by Government bringing the parties participating interest in the derived OML 127 to be as follows:-
NNPC 50%
Star Deep 32%
Famfa 10%
Petrobas 8%
The above is to enable you proceed with your obligations under the OML.”
The second letter is dated 19th April, 2005 with Ref. PI.BAL/3717/- S.205/Vol.2/80 the most relevant portion reads as follows:-
“RE: ACQUISITION OF PARTICIPATING INTEREST IN OML 127.
I am hereby directed to inform you that in exercise of the right, the Federal Government of Nigeria hereby takes a 50% participating interest in the block. This interest is vested in the Nigerian National Petroleum Corporation (NNPC).
Consequent upon above therefore, the breakdown or the participating interests in OML 127 will be as follows:-
1. NNPC 50%
2. Star Deep Pet Ltd 32%
3. Famfa Oil Ltd 10%
4. Petrohas 8%
The language of these two letters are clear, they all conveyed a message of the exercise of naked power exercised in a most arbitrary manner; all under the guise of exercising rights conferred by the so-called Back-in-Rights Regulation.
It is no surprise that the Appellant cried out for the way and manner his interest in OML 127 was forcefully acquired without any negotiation as clearly provided for in the Law, paragraph 35 of Cap. 10 LFN 2004.
I believe the Appellant is also on a firm ground to protest the discriminatory nature the whole exercise was conducted. When his interest was arbitrary acquired, it was a different story with regard to the holding of his Technical partners, Deep Star, and Petrobras. The interest of these two were left intact. The consequence of this arbitrary allocations smacks of complete alienation of the Appellant, even from his own technical partners.
It is also worth mentioning that the way and manner the 2nd Respondent ignored the law and failed not only to put the Appellant on notice, of the public interest it protected, by the acquisition of the Appellant’s interest only, but made no attempt to negotiate with him, clearly brought the point that the Appellant’s fundamental human right of fair hearing had been breached as provided for under Section 36 of the 1999 Constitution of Nigeria.
There is the argument put across by the learned counsel for Respondents that the negotiation talked about in paragraph 35 of the Petroleum Act Cap 10 LFN 2004 should have taken place at the application level and not when the application has already been granted. This submission to my mind is a double edge sword, either way the Respondents would come out injured.
In the first place, it was the same 2nd Respondent that processed the application of conversion of OPL 216 to OML 127 by the Appellant, 2nd Respondent made no effort to call upon the Appellant to negotiate. It went ahead to approve the conversion. It clearly flies in the face of 2od Respondent to try to claim that the negotiation should be at application level.
In the second place, 2nd Respondent could have save its face to seek for negotiation with the Appellant before his interest was arbitrarily and discriminatory acquired, the way it was done.
It is my considered view that Respondents are not entitled to advance such argument as they did.
In the light of what I discussed above and the findings I made, it is clear that the Appellant’s appeal has merit and it ought to be allowed and it is according allowed.
The decision of the lower Court, Adah J is hereby set aside.
Consequently the following orders are hereby made.
1. The compulsory, and arbitrary acquisition of the interest of the Appellant by the 2nd Respondent as outlined, in letters of acquisition dated 27th January, 2005 and 19th April, 2005 is hereby declared illegal, unlawful, wrongful, unconstitutional and thus null and void.
2. It is hereby declared that the purported acquisition of 50% of the Appellant’s interest in OML 127 in as much as it was not done in compliance with the provisions of the law paragraph 35 of Cap 10 of the LFN 2004 and the Constitution is illegal, unconstitutional, null and void and cannot confer any interest whatsoever in OML 127 in the 2nd Respondent, without due process of the law.
3. An Order is hereby made directing the 2nd Respondent to return to the Appellant all his interest in OML 127 illegally acquired.
4. An injunction is hereby granted restraining the 2nd Respondent, its assigns, servants, privies, subsidiaries, whomsoever from interfering with the rights of the Appellant in the said OML 127.
The Appellant is awarded costs in the sum of N50,000.00 against the two Respondents.
Other Citations: (2007)LCN/2562(CA)
