The NPA-Intels Controversy

 By Eze Onyekpere

The recent cancellation of the pilotage contract between the Nigeria Ports Authority and Intels based on the advice of the Attorney-General of the Federation and Minister of Justice, Abubakar Malami, raises a lot of issues and unanswered questions. Apparently, on a misunderstanding of the terms of a contract entered by the NPA and Intels, the former sought the advice of the Attorney General who responded that the contract as a whole was not just voidable, but void ab initio on the grounds of it being unconstitutional and illegal. The agreement was basically for the monitoring and supervision of pilotage districts in the Exclusive Economic Zone of Nigeria on terms, inter alia, that permit Intels to receive revenue generated in each pilotage district from service boat operations in consideration for 28 per cent of total revenue as commission.

The Attorney General is reported to have cited sections 80(1), 162 (1)and (10) of the 1999 Constitution as amended as the basis for the cancellation. S.80 (1) states: “All revenues or other moneys raised or received by the Federation (not being revenues or other moneys payable under this Constitution or any Act of the National Assembly into any other public fund of the Federation established for a specific purpose) shall be paid into and form one Consolidated Revenue Fund of the Federation”. By S. 162(1): “The Federation shall maintain a special account to be called ‘the Federation Account’ into which shall be paid all revenues collected by the Government of the Federation, except the proceeds from the personal income tax of the personnel of the armed forces of the Federation, the Nigeria Police Force, the ministry or department of government charged with responsibility for Foreign Affairs and the residents of the Federal Capital Territory, Abuja.” In sub-section 10 of S.162: “For the purpose of subsection (1) of this section, ‘revenue’ means any income or return accruing to or derived by the Government of the Federation from any source and includes: (a) any receipt, however described, arising from the operation of any law; (b) any return, however described, arising from or in respect of any property held by the Government of the Federation; (c) any return by way of interest on loans and dividends in respect of shares or interest held by the Government of the Federation in any company or statutory body.” A further reference was also made to the Treasury Single Account of the Federal Government.

The constitutional provisions are quite clear and the Attorney General is right in reaffirming them. But using these provisions as a basis for declaring a contract void from the beginning and therefore illegal is a different matter altogether. The question that should be raised to determine whether the Attorney General’s interpretation of the law is in order is straightforward and simple: “At what point are revenues or other moneys raised or received by the Federation” to make them eligible to be paid into the Consolidated Revenue Fund? The NPA acting on behalf of the Federation entered into a profit sharing agreement with Intels – 72 per cent accrues to the NPA whilst 28 per cent accrues to Intels. The proper interpretation should be that the revenue due to the Federation should be the 72 per cent due to the NPA and this becomes revenues for the CRF after it has been shared by the parties to the contract. The expectation is that parties in a transaction like this should have an agreed procedure of sharing their income to the satisfaction of all at stated intervals. They would have also agreed on where the accruing revenue is to be domiciled before it is shared. And this should be in an account where the representatives of the parties are signatories. If none of the parties is alleging being shortchanged or withholding funds due to it by the other and the issue is just one of the TSA versus other accounts, then this seems like a huge storm in a tea cup. If this analysis of the sums due to the CRF is right, then the contract cannot be said to be void, unconstitutional and illegal. The illegality would have arisen where a party withholds the actual percentage (in this case 72 per cent) due to the CRF.

 Agreements of this nature usually have provisions for settlement of disputes and arbitration is the favoured option. This should have been explored in the instant case to arrive at a position where justice which takes cognisance of the interest of all would have been done. The resort to outright cancellation is evidently a unilateral action and seems to send a wrong message to the investing community that the Federal Government, being the big brother in public private partnerships, may wield the big stick at any time thereby depriving the investor of expected income. This creates a climate of lack of respect for the sanctity of contracts which sends wrong signals to rational investors. Coming at a time Nigeria is busy wooing foreign investors, many would rather be cautious when they consider that local investors are involved and they get this kind of summary treatment. At the risk of being misunderstood, if the terms of the agreement no longer seem favourable to the Federal Government, it can call for renegotiation. However, wielding the big stick should only be done when all other reasonable options fail.

Terminating a contract of this nature may be very easy to pronounce. But a resolution of the interests of stakeholders including employees who may lose jobs, bankers who funded investments to be paid back and any penalty clauses for unilateral action may pose the bigger challenge. If at the end of the day, the dispute goes to arbitration or the judicial process, it may be long-drawn out and messy and the parties on both sides are bound to suffer some loss. There are media reports of penalties paid by the Federal Government for cancelling the Lagos Metroline project in the 1980s and the unending disputations over the Ajaokuta Steel Mill which was recently resolved. It is therefore not late for the parties to go back to the negotiation table to find a middle ground that accommodates the interest of all.

Finally, it is important for the Federal Government not to create the impression that the fact of one of the major shareholders in Intels (Atiku Abubakar) having declared interest to contest the 2019 presidential election is propelling this cancellation. The negotiation table therefore beckons as the best place to clear the fog.

 
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