SCIENCE & LAW, CHONGQING, CHINA, GT Nigeria's Laws

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Content: International Journal of Business & Law Research 5(3):1-187, July-Sept. (Special Issue), 2017 1 © SEAHI PUBLICATIONS, 2017 www.seahipaj.org ISSN: 2360-8986 SOUTHWEST UNIVERSITY OF POLITICAL SCIENCE & LAW, CHONGQING, CHINA. Title The Antithesis of Nigerian Local Content Act 2010 to Nigeria's Laws, Global Trade and Investment Norms BY Name: Dr. Ituma, Chibueze Calistus Reg. No. Wb201403510101 Major: International Trade & Investment Law A Dissertation Submitted to the School of Post Graduate Studies, School of international law, Southwest University of Political Science and Law, Chongqing, People's Republic of China, In Partial Fulfillment of the Requirements for the Award of Doctoral Degree in International Law and Jurisprudence
2 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 Ok June, 2017 CERTIFICATION This is to certify that this dissertation is the original work understudied by Ituma, Chibueze Calistus of the School of International Law, Southwest University of Political Science and Law, Chongqing, Peoples Republic of China. Signed ____________________ Ituma, Chibueze Calistus (Student) ____________________ Prof. Deng Ruiping (Supervisor) ___________________ Prof. Zhang Xiaojun (Dean, School of International Law Abstract The promulgation of the Nigerian Oil and Gas Industry Content Development Act, 2010, by the Federal Government of Nigeria, is a flagrant infraction of both Nigerias domestic laws and global trade and investment norms
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The epicenter of globalization is unfetterOedk access to domestic markets and congenial foreign direct investment climate. Paradoxically, the Nigerian Local Content Act, 2010, is designed to restrict and discriminate against foreign goods and services and to offer undue advantages to Nigerian locally manufactured goods, services and service suppliers to the detriment of their foreign counterparts. Articles 26 and 27 of the Vienna Convention on the Laws of Treaties, 1969, mandate parties to a treaty to observe same in good faith and to refrain from applying its domestic laws to defeat its international obligations. In the same vein, Article XVI.4 of WTO Agreement urges contracting parties not to invoke its national laws, regulations and administrative measures to impair its obligations under the multilateral trading system. Nigeria is a founding member of WTO since January 1, 1995. The country is also a party to the VCL. Nigeria has equally entered into a number of binding Bilateral Investment Treaties with other countries with national treatment clause as the hallmark of such treaties. In order to woo foreign investors and propel foreign direct investment, Nigeria has enacted some laws to promote foreign direct investment. Unfortunately, and ironically too, the local content law 2010 embodies provisions which breaches existing Nigerian laws, global trade and investment laws. The result is policy somersault, economic decline and international liability. The purpose of this dissertation is, therefore, to uncover all the offending sections of the law, identify the problems of the nations oil and gas industry and law reform of the 2010 Act to align with global best practice. The research is structured into seven parts namely, introduction, background of the study, an overview of the nations oil and gas laws, analyses of the 2010 Act, the inconsistency of the Act to Nigerian laws, the inconsistency of the Act to WTO law and Foreign Investment Laws, conclusion and recommendations. The introductory section underscores the objectives, significance, legal problems, methodology and innovations of the study. Chapter one entitled Background of the Study, is a diagnosis of the rationale behind the enactment of the NOGICD Act, 2010. It discusses the challenges of the oil and gas industry and the justification for the passage of the NOGICD Act, 2010., and uncovered corruption as the bane of
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the nations oil and gas sector. It recomOmkends strengthening of the existing anti graft agencies with autonomy and life jail sentence for corrupt related offences. Chapter two labeled An Overview of Nigerian Oil and Gas Laws, is a brief introduction of oil and gas legislations in Nigeria with the principal and subsidiary legislations in focus. It unraveled policy sommersault and functions overlap in the nations oil and gas sector. The author prescribes a repeal of the redundant laws and institutions in the sector and effective enforcement of laws regulating the system. Chapter three is headed Analyses of the NOGICD Act, 2010.The chapter examined the provisions of the Act, revealed the incompatible sections of the law with WTO Laws and Nigerian legislations. The writer proposes a comprehensive overhaul of the NOGICD Act, 2010 to conform with Nigerias international obligations and avert international trade and investment disputes. Chapter four styled The Inconsistency of the NOGICD Act with Nigerian Laws and treaties probes into the incompatibility of the Act with several existing Nigerian laws and domesticated treatiesand recommends amendment of the offending sections of the law. Chapter five captioned The Inconsistency of the NOGICD Act with WTO Laws and Foreign Direct Investment Laws, identified the relevant WTO and FDI laws infringed by the NOGICD Act, 2010 and advocates law reforms to accord with global best practices. Chapter six is titled Conclusion and Recommendations and it chronicled the findings of the research, conclusion and recommendations. The innovations achieved by the research include deregulation of the nations oil and gas sector, economic diversification, stamping out corruption in the system, adoption of renewable energy policy, Privatization of the oil and gas sector, control of oil and gas resources by the oil producing states and scrapping of multiple institutions discharging similar functions in the oil and gas industry. The writer applied case law analyses, black letters technique, demonstrative, quantitative and qualitative methodologies in arriving at a valid conclusion.
Keywords Nigerian Oil and Gas and Content Development Act, FDI, International trade Law.
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DEDICATION This research work is dedicated to the people of the Oil rich Niger Delta Region of Nigeria who are suffering in the midst of plenty.
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ACKNOWLEDGMENT My indebtedness first goes to my erudite supervisor, Prof. Deng Ruiping who assisted me immensely with resource materials and wise guidance and counseling which led to the success and production of this encyclopedia of global trade and investment norms in connection with the Nigerian Oil and Gas Industry Content Development Act, 2010. My greatest adoration and appreciation also goes to the Alpha and Omega, the Almighty God who coronated me with this magnificent academic crown despite the frustrations orchestrated by evil forces, wicked men and women ill-will who stood by my way during the struggle to attain to this pinnacle of academic endeavour. I must not forget to salute my elder brother, Chief Sunday Ituma for his endless financial support to me which ultimately culminated to the success of this project. Posterity will not forgive me if I fail to acknowledge the patience, industry and painstaking efforts deployed by the duo of Ikemdinachi Omah and Sunday Eze in typing and printing of this work.
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Let me also salute my dearest wiOfke, Mrs. Ituma Stella, for her support, cooperation and understanding especially while I am away in my school in China. Permit me to recognize the resilience and expertise of Mr. Eze Chukwuma in typing skill demonstrated in the production of this work. May God bless you all.
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Table of Contents Cover Page Title Page Certification Abstract Keywords Dedication Acknowledgement Table of Contents Table of Acronyms/Abbreviations Table of Statutes, Conventions/Treaties Table of cases Introduction 1. Objectives of the study 1.1 Expansion and Liberalization of the Nigerian Oil and Gas Sector 1.2 Identification of the Infringing Sections of the Local Content Act to Global Trade and Investment Law 1.3 Promotion of Economic Growth and Development 1.4 Job Creation 1.5 Development of a Comprehensive Legal Framework on Local Content Policy for Nigerian Government and the World at large 1.6 Transfer of Technology 2. Research Status in Nigeria and Overseas 2.1 Research Status in Nigeria 2.2 Research Status on the Subject Overseas 3.Theoretical and Practical Significance of the Study 3.1.Theoretical Significance of the Study i. Legislative Insight and Assistance in Law Making Process ii. Instrument for Policy Formulation for the Executive and Government Agencies iii. Aid to Law Teachers and Students iv. Reference Material to the Nigerian Judiciary and other International Tribunals. v. Invaluable Asset for Research Institutions 3.2.Practical Significance of the Study i. Promotion of Foreign Direct Investment in the Oil and Gas Sector of the Nations Economy ii. Promotion of Economic Growth and Development iii. Increased Standard of Living for Nigerians
Content Pages x 1 2 3-4 4 5 6-7 8-12 13 14-15 16-17 18 18 18 18-19 19 19 19-20 20 20 20-23 23-25 25 2525 25 26 26 26 26 26 27 27
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iv. Transfer of Technology
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v. Elimination of Foreign Trade and Investment Disputes
vi. Employment and Wealth Creation
4. Research Methodology
4.1 Case Law Analysis
4.2 Demonstrative Methodology
4.3 Normative/Black Letter Analysis
4.4 Quantitative and Qualitative Methodology
4.5 Comparative Analysis
5. Innovation Plan and Perspective of the Study
5.1 Deregulation of the Oil and Gas Industry
5.2 Elimination of Duplication and Overlapping of Functions in the Sector
5.3 Departure from Oil to Economic Diversification
5.4 Indigenous Control of Oil and Gas Resources by Oil Producing States
5.5 Stamping Out Corruption in the Oil and Gas Industry
5.6 Emphasis and Reliance should be placed on Renewable Energy
Chapter 1 Background of the Study 1.Introduction 1.1 International Legal Instruments in Support of Local Content Law 1.2 Theories Sustaining the NOGICDA 2010 1.2.1Strategic Sector Theory 1.2.2SocialCompensation Theory 1.2.3 Protection of Infant Industry Theory 1.2.4Market Power Theory 1.2.5 Political Unity Theory 1.3 Problems Facing the Nigerian Oil and Gas Industry 1.3.1 Oil Theft, Illegal Bunkering and Piracy 1.3.2 Insecurity in the Oil Rich Niger Delta Region 1.3.3 Poor Funding of Science and Technology and Research Institutions 1.3.4 High Level of Corruption in the Sector 1.3.5 Duplication of Functions and Power Tussle 1.4 Conclusion
Chapter 2 An Overview of Oil and Gas Law in Nigeria 2. Historical Background of Oil and Gas Legislation in Nigeria 2.1Analysis of Principal Oil and Gas Statutes in Nigeria 2.1.1The Petroleum Act of 1969 (as amended) 2.1.2 Deep Off-shore and Inland Basin Production Sharing Contract Act (as Amended) 2.1.3 Royalty Payable in Deep Offshore Production Sharing Contract 2.1.4 Territorial Waters Act 2.1.5 The Exclusive Economic Zone (EEZ) Act 2.1.6 Oil in Navigable Waters Act 2.1.7 Oil Pipelines Act 2.1.8 Environmental Impact Assessment Act (EIA) 2.1.9 Harmful waste (Special Criminal Provisions) Act 2.1.10 West Africa Gas Pipelines Project (Special Provisions Etc) Act
28 28 28-29 29 30-31 31 32 32 32-33 33 33 34 34-35 35-36 36-37 37 37 37-39 39 40 40 40 41 42 42 43 43 44 45 45 46-47 47 47 47-48 48-49 49-51 52-53 53-54 54-55 55 55-57 57-59 59-61 61-62 62-64
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2.1.11 The Energy Commission Act 2.1.12 Petroleum (Special) Trust Fund
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64-67 67-68
2.1.13 The National Oil Spill Detection and Response Agency (Establishment) Act 68-70
2.1.14 Petroleum Production and Distribution (Anti-Sabotage) Act
70-71
2.1.15 The Nigerian LNG (Fiscal Incentives, Guarantees and Assurance) Act 71-73
2.1.16 Coastal and Inland Shipping (Sabotage) Act
73-74
2.1.17 Niger Delta Development Commission (NDDC) (Establishment, Etc) Act 74-76
2.1.18 Allocation of Revenue (Abolition of Dichotomy in the
Application of the Principle of Derivation) Act
76-77
2.1.19 Nigeria Extractive Industry Transparency Initiative (NEITI) Act, 2007 77-79
2.1.20 The Nigerian Oil and Gas Industry Content Development Act, 2010
79-80
2.2 Analysis of Subsidiary Legislations in Nigerias Oil and Gas Sector
80
2.2.1 Oil Prospecting Regulation
80-83
2.2.2 Marginal Fields Operations (Fiscal Regime) Regulations
83
2.2.3 Petroleum Drilling and Production Regulation
83
2.2.4 Oil Mining Lease
84
2.3 Conclusion
85-86
Chapter 3 Analysis of the Nigerian Oil and Gas Industry Content Development Act, 2010 3.1 Introduction 3.2 Overall Policy Objectives and General Obligation of the Act 3.3 Minimum and Specification of Nigerian Content 3.4 Minimum Nigerian Content in Bid Evaluation 3.5 Employment and Training Requirements of the Act 3.6 Research and Development Requirements 3.7 Transfer of Technology Requirements 3.8 Requirements for Provision of Specialized Services 3.8.1 Insurance and Reinsurance Services 3.8.2 Legal Services Requirements 3.8.3Financial Services Requirements 3.9 Prohibition of Importation of Welded and Fabricated Products 3.10 Conclusion
86 87 88-89 90-98 98-100 100-103 103-104 104-105 105 105 106 107 108 108-109
Chapter 4 The Inconsistency of the NOGICD Act with Domestic Laws.
110
4.1 Introduction
110
4.2 The 1999 Constitution of the Federal Republic of Nigeria (as amended)
110-111
4.3 Nigerian Investment Promotion Commission Act
112
4.4. National Office for Technology Acquisition and Promotion Act
113
4.5 The Department of Petroleum Resources and the Nigerian Content Division 113-114
4.6 The Companies and Allied Matters Act
114-115
4.7The Inconsistency of NOGICD Act with Nigerias Bilateral Investment Treaties
116-117
4.7.1The United Kingdom
116-120
4.7.2The Netherlands
120
4.7.3 Republic of Korea
120
4.7.4 Spain
120-121
4.7.5 Germany
121-122
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4.7.6 The Finland
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122
4.7.7 Turkey
122
4.8 National Treatment under Nigeria BITs
122-123
4.9 Breach of National Treatment Obligation by the NOGICD Act.
123
4.9.1 Nigerian Content: Definition and Background
123
4.9.2 Nigerian Content Instruments
124
4.9.3 Exclusive Consideration
124
4.9.4 First Consideration
124-126
4.9.5 Full and Fair Opportunity for Indigenous Oil and Gas Services Companies 126
4.9.6 Employment, Training, Research and Development Obligations
126
4.9.7 The Legal Effect of Nigerian Content Obligations on Nigerias National
Treatment Obligations and what Dispute Resolution Mechanisms are available?126-128
4.9.8 The Impact of NOGICD Act on
Nigerias Bilateral Investment Treaties
128-129
4.10 Conclusion
130
Chapter Five The Antithesis of NOGICD Act with Global
Trade and Investment Law
130
5. Introduction
130-136
5.1 The NOGICD Act and General Agreement on Trade in Services (GATS), 1994 136-137
5.1.1Evolution of National Treatment and the Duty of
Host States to Foreign Investors (Before World War I)
136-137
5.1.2 The Russian Revolution and Repudiation of Private Property
137-138
5.1.3 The Mexican Revolution and the Social Function of Property
138-139
5.1.4 Carlos Calvo Doctrine
139-142
5.1.5 The Havana Charter
139-142
5.1.6 Permanent Sovereignty over Natural Resources (1962)
143-147
5.1.7 From Permanent Sovereignty to the New International Economic Order 148-153
5.2 Nature of the National Treatment Obligation of Article XVII:1 of the GATS 153
5.2.1 Test for National Treatment Obligation under Article XVII:1 of the GATS 154-155
5.3 Breach of TRIMs Obligation by the NOGICD Act
155-156
5.4 Breach of Quantitative Restriction Obligation by the NOGICD Act
156-157
5.4.1 General Prohibition on Quantitative Restrictions
157-158
5.4.2 Is Section 53 of NOGICD Act Consistent with Article XI:1 of GATT 1994? 158-159
5.4.3 Can Nigeria be exonerated by Article XVIII and XII of GATT 1994?
159-160
5.5 Breach of National Treatment Standard under GATT 1994
160
5.5.1 Nature of the National Treatment Obligation of Article III of the GATT 1994 160
5.5.2 The Object and Purpose of the National Treatment Obligation
160-162
5.5.3 Breach of Article III of the GATT, 1994
162-163
5.6 Breach of Other Foreign Investment Regulations
163
5.6.1 NOGICD Act and UNCTAD Guidelines on FDI
163
5.6.2 Infraction of ICC Guidelines on FDI 2012
164
5.6.3 NOGICD Act and World Bank Guidelines on FDI, 1992
165
5.7 Conclusion
165-166
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Chapter 6 Conclusion 6.1 Conclusion
and
RecommeOnkdations
6.2 Recommendations
6.2.1 Scraping of the NNPC
6.2.2. Strengthening of Anti-corruption Agencies in Nigeria
6.2.3 Making Corruption a Capital Offence
6.2.4 Privatization of Oil and Gas Industry
6.2.5 Establishment of New Oil Refineries
6.2.6 Repeal of offending Sections of NOGCID Act
6.2.7 Integration and Participation of Niger Delta People
6.2.8 Integration and Participation of Niger Delta People
6.3 Proper Monitoring and Control of Nigerias Water Ways
6.3.1 Adequate Ocean Governance
6.3.2 Efficient Management of Oil Spills
6.3.3 Eradication of Pipeline Vandalisation
6.3.4 Chemical Finger Printing of Crude Oil
6.3.5 Signing of Agreement with Neigbouring States
Bibliography
Sample Questions
12 167 167-168 169 169 169 169 169 170 170 170 170 170 171 172 173 173 174 175-183 186-187
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GATT FDI GATS NOGICD OML OEL OPL NEITI WTO DSB DSU NNPC IOC NIPC CAMA NOTAP MONOC ICC BIT QR BOP UNCTAD NOSDRA LNG NDA UNGA EEZ LFN NCDMB NWLR UNCLOS EIA DPR PTDF
Table of Acronyms/Abbreviations General Agreement on Tariffs and Trade. Foreign Direct Investment General Agreement on Trade in Services. Nigerian Oil and Gas Industry Content Development Acts Oil Miming Lease. Oil Exploration License Oil Prospecting License. Nigerian Extractive Industry Transparency Initiative World Trade Organization Dispute Settlement Body Dispute Settlement Understanding Nigerian National Petroleum Corporation International Oil Companies Nigerian Investment Promotion Commission Companies and Allied Matters Act National Office for Technology Acquisition and Promotion Multi National Oil Corporations. International Chamber of Commerce. Bilateral Investment Treaties Quantitative Restriction Balance of Payment United Nations Conference on Trade And Development National Oil Spill Detection and Response Agency Liquefied Natural Gas Niger Delta Avengers United Nations General Assembly Exclusive Economic Zone Laws of the Federation of Nigeria Nigerian Content Development Monitoring Board Nigeria Weekly Law Report United Nations Convention on the Laws of the Sea Environmental Impact Assessment Act Department of Petroleum Resources Petroleum Technology Development Fund
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Table of Statutes, Conventions/Treaties A. Charters, Conventions and Treaties 1. Articles III, XI, XII, XVIII, XX and XXI of the General Agreement on Tariffs and Trade, 1994 2. Article XVII of the General Agreement on Trade in Services, 1994 3. Article II of the Agreement on Trade Related Investment Measures, 1994 4. Article 26 and 27 of the UN Declaration on the Rights of Indigenous Peoples, 2007 5. Articles 1 ­ 8 of the UNGA Resolution 1803 (XVII) of 14 December, 1962 6. Article XVI.4 of the WTO Agreement 7. Article 15 of the Convention Concerning Indigenous and Tribal Peoples in Independent Countries, 1991, N0. 1691. 8. UN Charter on Economic Rights and Duties of States, adopted on 12 December, 1974 by UNGA Resolution 3281 (xxix) 9. UNGA Resolution 3201 (s-VI) and Resolution 3202 (S-VI)of 1 May, 1974. 10. Sections 26 and 27 of the Vienna Convention on the Law of Treaties, 1969. 11. Article 2 of the United Nations Convention on the Laws of the Sea, 1982 12. Article 2 of the Charter on New International Economic Order. 13. Nigeria Bilateral Investment Treaty with France of August 19, 1991 14. Nigeria Bilateral Investment Treaty with United Kingdom of Dec. 11, 1990 15. Nigeria Bilateral Investment Treaty with Netherlands of Feb. 01, 1994 16. Nigeria Bilateral Investment Treaty with Taiwan Province of China of April 7, 1994 17. Nigeria Bilateral Investment Treaty with Republic of Korea of Feb 01, 1999 18. Nigeria Bilateral Investment Treaty with Romania of June 3, 2005 19. Nigeria Bilateral Investment Treaty with Germany of Sept. 20, 2007 20. Nigeria Bilateral Investment Treaty with Switzerland of April 1, 2003 21. Nigeria Bilateral Investment Treaty with Serbia of Feb. 7, 2003 22. Nigeria Bilateral Investment Treaty with Spain of Jan. 19, 2006 23. Nigeria Bilateral Investment Treaty with Finland of March 20, 2007 B. Nigerian Municipal Legislations 24. Section 19 of the 1999 Constitution of the Federal Republic of Nigeria (as amended) 25. Section 43 of the 1999 Constitution of FRN (as amended). 26. Section 1 of the Petroleum Act, Cap. 10, Laws of the Federation of Nigeria, 2004. 27. Sections 1, 2(a), 3, 7(5) of the Petroleum Act of 1969 (as amended) Cap. P10 Laws of the Federation of Nigeria, 2004. 28. Sections 11 (1), 11 (2) of the Deep Off-shore and Inland Basin Production Sharing Contract Act (1990) as Amended 29. Section 1(1) of the Territorial Waters Act of 1967 (as amended)
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30. Section 18 (1) of the Interpretation AOckt Cap 123 LFN, 2004 31. Section 1 of the Exclusive Economic Zone (EEZ) Act of 1978 32. Section 1 of the Oil in Navigable Waters Act 1968 33. Sections 3(a) (b), 4(1) (2), 5(1)(a) (b) (c) and (2), 8, 9, 31(1) (2) (3) (4) (5) of the Oil Pipelines Act of 1956 34. Sections 1 (a) (b) (c) and 2 of the Environmental Impact Assessment Act (EIA) of 1992 35. Section 1 (2) (a) (b) (c) and (d) Harmful waste (Special Criminal Provisions) Act 36. West Africa Gas Pipelines Project (Special Provisions Etc) Act, 2005 37. Sections 3 (1) (a) (b) and (c) of the Petroleum (Special) Trust Fund of 1993 38. Sections 3 (1) (d) (c) and (h) of the National Oil Spill Detection and Response Agency (Establishment) Act, 2016 39. Section 1 (a) (b) and (c) of the Petroleum Production and Distribution (Anti-Sabotage) Act, 1975 40. The Nigerian LNG (Fiscal Incentives, Guarantees and Assurance) Act of 1990 (as amended) 41. Section 22 (5) (a) ­ (m) of the Coastal and Inland Shipping (Sabotage) Act, 2003 42. Section 3 of the Nigeria Extractive Industry Transparency Initiative (NEITI) Act, 2007 43. Sections 3, 11, 12, 53, of the Nigerian Oil and Gas Industry Content Development Act, 2010 44. Sections 1, 19, 43 of the 1999 Constitution of the Federal Republic of Nigeria (as amended) 45. Section 4(b) of the Nigerian Investment Promotion Commission Act, 2004 46. Section 5 (2) of the National Office for Technology Acquisition and Promotion Act, Cap N62 LFN 2004 47. Section 54 of the Companies and Allied Matters Act, Cap. C 20 LFN 2004.
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Table of Cases A. WTO/International Tribunal Cases 1. China ­ Electronic Payment Services (2012) Panel Report, para. 7.700 . 2. EC - Bananas III (1997) Panel Reports, Para. 7.314. 3. EC-Bananas III (Article 21.5 ­ Ecuador (1999) Panel Report, para.6.100. 4. China ­ Publications and Audio-visual products (2010) Panel Reports, Para. 7.942. 5. China-Measures Affecting Electronic Payment Services (2012) Panel Report, WT/DS413/R. 6. Turkey ­ Restrictions on Imports of Textile and Clothing Products, Appellate Body Report, WT/DS34/AB/R, adopted 19 November 1999, DSR 1999; para 9.63. 7. Japan ­ Semi-Conductors (1988), Panel Report, para. 104. 8. India ­ Quantitative Restrictions (1999), Panel Report, para. 5.129. 9. China ­ Measures Related to the Exportation of Various Raw Materials, Appellate Body Reports ,WTO DS394/AB/R/WT/DS395/AB/R/WT/DS398/AB/R, adopted 22 February 2012. 10. EEC ­ Minimum Import Prices (1978). 11. Brazil ­ Measures Affecting Imports of Retreated Tyres, Appellate Body Report, WT/DS332/AB/R, adopted 17 December 2007, DSR 2007. 12. Japan ­ Alcoholic Beverages II (1996). Appellate Body Report, 109. In the footnotes to this paragraph. 13. US-Section 337 Tariff Act (1989). Para. 5.10: Panel Report. 14. US-Superfund (1987). Para. 5.1.9, Panel Report. 15. Italy Agriculture Machinery (1958). Para. 11. 16. Korea-Alcoholic Beverages (1999), Appellate Body Report, para. 120. 17. Canada ­ Periodicals (1997), Appellate Body Report, 464. 18. EC-Absestos (2001), Appellate Body Report, para. 98 .
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1984.
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20. Belgium V Senegal (2012) ICJ Rep. 422.
21. B. Domestic Cases Petroleum BV v FBIR,(2004) 3 NWLR (pt. 859).
22. Company Nig. Ltd v Federal Board of Inland Revenue, (BIR) (1997) 7 NWLR (pt.
514)535.
23. Abacha v Fawehinmi,(1997) 4 NWLR [pt . 498] p. 10.
24. Ibidapo Obev Lufthansa Airlines,(1997) 4 NWLR [498] p. 124.
25. Nigeria AGIP Oil Company Ltd V Kemmer, (2001)8 WLR (pt.716) 506.
26. Ayorinde v Oyo State Government, (2007) All FWLR 709.
27. AG Federation v AG Abia, No. 2 (2002) 6 NWLR (pt. 764) 542.
28. Abioye v Yakubu, (1991) 5 NWLR (pt. 190) 130.
29. Salati v Shehu, (1986) 1 NWLR (pt. 7) 198.
30. Nkwocha v Governor of Anambra State (1984) 6. SC 262.
31. Governor Ekiti State of Nigeria Vs Olubunmo,(2017) 3NWLR (Pt 1551) page 1 Ratio 5.
32.Tony Momoh v Senate of the National Assembly &Ors, (1981) INCLR p.21.
18 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 Ok INTRODUCTION 1. Objectives of the Study 1.1 Expansion and Liberalization of the Nigerian Oil and Gas Sector A central objective of this research is to expand and liberalize the Nigerian Oil and Gas Sector. The enactment of the Local Content Act 2010 shut the door to foreign investors in favour of indigenous operators and companies. The result is that several multinationals and international oil companies (IOC) were compelled to embark on mass exodus to Angola, Ghana and other oil producing African countries where investment climate in the sector is more favourable. This spells doom for the nation, a mono economy whose over 80% of its revenue earning is dependent on oil and gas resources. The winding-up of IOCs translates into huge job losses, thereby increasing the percentage of unemployment rate in the country. It was widely reported recently on the pages of newspapers that no fewer than 6,000 jobs have been lost in the industry since the promulgation of the Act in 2010.1 It follows that the liberalization of the industry will undoubtedly attract foreign investment and capital inflow into the country. 1.2 Identification of the Infringing Sections of the Local Content Act to Global Trade and Investment Law Nigeria is a founding member of the world Trade Organization (WTO) since 1995. The WTO is established by treaty including the GATT, GATS, TRIMS etc. Parties to a treaty are bound by its provisions and must observe and enforce same 1 O. Adebayo, Guardian Newspaper, 10 April, 2016 p.3.
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in good faith. 2 The country has also Oekntered into binding Bilateral Investment Treaties (BTI) with other states. In the case of the Question Concerning the obligation to Extradite or Prosecute3, it was held that a state cannot invoke the provision of its internal law to defeat its international obligation. 4 The same position is reiterated by a renowned scholar that treaty obligation cannot be dissolved by domestic legislation.5 Thus, one objective of this research is to uncover all the infringing provisions of the law and propound a comprehensive legal framework for reform and conformity with the international legal norms. 1.3 Promotion of Economic Growth and Development. The adoption of the findings and recommendations of this research will in no small measure trigger off economic boom and growth of the country. Foreign investment in the Oil and gas Sector is a sure banker upon the application of this research. This translates into capital importation into the country through industrialization of the sector. 1.4 Job Creation The research aims to create massive employment opportunities for the teaming unemployed Nigerian job seekers. The numerous oil and gas factories to be established by foreign investors upon the liberalization of the sector will automatically engage many unemployed Nigerian graduates in the juicy industry. 1.5 Development of a Comprehensive Legal Framework on Local Content Policy for Nigerian Government and the World at large. The researcher has carefully examined local content laws in other oil producing countries including Norway, Trinidad and Tobago, Brazil and Angola. The knowledge acquired therein has repositioned and enriched the psyche of the author in developing a robust legal framework to assist policy makers in such a manner that would not be antithetical to international legal order. 2 See Section 26 of the Vienna Convention on the Law of Treaties, 1969. 3 Belgium V. Senegal (2012) ICJ Rep. 422. 4 See Section 27 of the Vienna Convention on the Law of Treaties, 1969. 5 I. Brownlie, Principles of Public International Law, 7th Edition, Oxford University Press, 2008, p. 13
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A loose and progressive approach thOakt will balance the interest of the investor and the host states has been found to be very rewarding. Legislators across the globe, executive and scholars alike will find this masterpiece a useful tool in future enactments and policies on the subject matter. 1.6 Transfer of Technology The local technology in the oil and gas industry in Nigeria is still at the infant stage. Sophisticated technology that involves high skilled manpower is required in oil prospecting, exploration and production. Ultimately, the presence of foreign skilled personnels are needed to gradually infuse the technology into Nigerians through constant training and capacity building.
2. Research Status in Nigeria and Overseas. 2.1 Research Status in Nigeria Previous research works on the subject matter in Nigeria do not specifically address the issues raised by the topic under review. The reason is not farfetched. The Local Content Act was recently promulgated in 2010. Not much has therefore been achieved in the area. Academic literature on local content policy at the domestic plane mainly chronicles the advantages of the Local Content Act, 2010. D. Okusami 6 is a conscious attempt at providing an overview of the Local Content Act. The author focused on the background and interpretation of the various sections of the Act. Unlike the present researcher, this author did not advert his mind to the relationship between the Act and the WTO Trade Related Investment measures
6 D. Okusami, An Overview of the Nigerian Local Content Act, a paper presentation at the African Energy Week Conference, Cape Town. South Africa, 29th September, 2010.
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(TRIMs) and the norms of InternationOakl Investment Law as it affects the Local Content Act 2010. Accordingly, this research work differs significantly from the aforementioned literature as it goes beyond mere construction of the Act and mirrors Nigerias international obligations which the Local Content Act tends to undermine and the attendant legal and economic consequences. S. Idris7 is another work on the subject matter. It dwelt on the exposition of massive corruption in the oil and gas industry in Nigeria. It differs radically with the present research as no mention was made to the international perspective of the law. A. Adffulu8 is one other domestic commentator on the topic under discussion. The article concentrated only on the infringement of national treatment obligation and the GATT. The work is in parallel line with the current research as it failed to uncover Nigerian legislations which the Local Content Act also conflict with. It did not unravel the conflict between the Local Content Act 2010 and the GATS as well as Nigerias Bilateral Investment Treaties with other states. The above lacuna has been effectively covered by the present writer. Jean Balouga9 also added his voice on the Nigeria Local Content Act 2010. Again, this writer explored the prospects and the challenges of the Act. It is apposite to the present study as it turned blind eye to the international dimension of the law particularly global trade and investment laws, the fulcrum of this research. Michael Ibanga10 is as well one other municipal scholar who worked on the Local Content Act 2010. This masterpiece adumbrated the potential benefits of the
7 S. Idris, Nigeria Extractive Industries Transparency Initiatives Financial Flows Reconciliation Report 2009, 211 oil and Gas Audit Abuja 2012. 8 A. Adeoye, Nigeria: National Treatment and Nigerias New Local Content Legislation. Mandaq Publication series, 9 June, 2010.p.3. 9 Jean Baloya, Nigeria Local Content: Challenges and Prospects, International Association for Energy Economics, 2010. 10 Michael Ibanga, The Local content Act, Petroleum Industry Bill and National Development a conference paper delivered at the Nigerian Association of Law Teachers Annual Conference 2011 held at the Rivers State University of Science and Technology, Port Harcourt, Nigeria, July 18th ­ 21st, 2011.
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Local Content Act 2010 and the petrolOekum industry Bill currently pending before the National Assembly to the development of Nigerias economy. It has no international trade connotation quite unlike the current topic. It failed to make a comparative study of Nigerias Local Content Legislation with other jurisdiction as was the case with the present writer who compared the Act with the Norwegian, Brazilian, Malaysian and Trinidad and Tobago versions of Local Content Legislation. This compendium of experiences assisted the writer to develop an encyclopedia of legal framework on Local Content Policy devoid of rift with international legal norms. C.S. Ayonmike11 is equally another contributor to the discourse. The above scholar hinged his research on the technical and vocational benefit of the Act to the development of Nigerias economy. It differs from the present research in that it did not tackle the rivalry existing between the two legal regimes. The pivot of the current research is the international law perspective of the Nigerias Local Content Act 2010 and its implication on global trade and investment law. Perhaps, another eminent scholar on the subject at the domestic plane is A. Akindeland.12 His work is purely a statute review with no international dimension. In contrast, this dissertation x-rays the relevant international instruments to which the Local Content Act 2010 impinges on Nigerias obligation thereto. A.O. Ewere13 dealt on the enthronement of good governance in the Nigerian oil industry. No reference was made to global trade and investment regulations, an area which forms the hallmark of this intellectual voyage. Lawrence Atsegbua14 is one recent literature on the subject matter. Unlike the author of this dissertation, the above writer dwelt on the Nigerian oil and gas 11 C.S. Ayonmike, The Nigerian Local Content Act and its implication on Technical and Vocational Education and Training and the Nations Economy, European Centre for Research Training and Development, UK, Vol. 3, No. 1, January 2015, p. 26. 12 A. Akindelano, Review of Nigerias Local Content legislation, accessible at http://www.akindelano.com/d/10D%20-%201-10c al%20content%20Act.pdf, accessed on July 18, 2016. 13 A.O. Ewere, NEITI and Good Governance in the Nigerian Oil Industry, AMBIK Press LTD, 2011, p. 125.
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substantive enactments without havOikng regards to the link it shares with international legal regime. A. Eteppe15 lent his voice to the discourse. His work is devoted to the causes of conflict in the oil and gas sector and the attendant political strategies to navigate over such conflicts. Quite apposite to this research, it has no bearing on the influence of the Local Content Act on Nigerias economy and the damage it will do to Nigerias foreign relation. This aspect has been examined in this research carefully, appropriate measures recommended to boost the nations economy. Onyemaechi Augustine Eke 16 is another work on the periphery of this dissertation. It vigorously analyzed the crisis of development arising from Nigerias oil wealth. The author failed to examine the legal and economic doom which the Local Content Act 2010 will spell on Nigerias existing legislations and the global trade and investment norms. This area has been adequately treated by the present researcher which makes this research very unique and crucial to Nigerias law and the economy. The above is the state of affairs as regards domestic research situation on the topic.
2.2 Research Status on the Subject Overseas A great deal of intellectual energy has been dissipated and deployed in the field of Local Content Policy overseas.
14 Lawrence Atsegbua, Oil and Gas Law in Nigeria: Theory and Practice, 3rd Edition, Filter Line Publishers, Benin City Nigeria, 2012, p. 121. 15 A. Etekpe, The Politics and Conflicts over Oil & Gas in the Niger Delta Region: The Bayelsa State Experience 1990 ­ 2006, Tower Gate Resources, Port Harcourt, Nigeria, 2007, p.8. 16 Onyemaechi Augustine Eke, Politics, Oil Wealth and Crisis of Development, Nigerias Fifty Years of Oil Stain and Infamy, WillyRose& Appleseed publishing Co, 2010, p.15.
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G.M. Grossman17 is acclaimed to haOvke evolved the first and most robust and comprehensive model on Local Content Policy in 1981. He propounded a model on Local Content Scheme. The work examined the influence of content protection and content preference on resource allocation in relation to market structure and domestic intermediate goods industry.18 R.A.Belderbos and L.Sleuwaegen (1997) 19 is a work on Local Content requirement. It focuses on the interpretation of Local Content requirement. The above works have no connection with WTO law and other global investment regulation. The current research work is designed to uncover the rift in global trade law and the Nigerian Local Content Act 2010. Other foreign literature on Local Content Policy include W.Gu and S.Yabuchi (2003)20, Stephen E.Guisinger, et al (1985)21, M.Hao,M.Mackenzie, A.Domerant and K.Strachan (2010)22, P.Heum, C.Quale, J.E.Karlsen, M.Kragha, and G.Osahon (2003)23, INTSOK (2003)24, J.Jensen andD.Tarr (2008)25,R.Koopman,
17 G.M. Grossman, The Theory of Domestic Content Protection and Content Preferences, The Quarterly Journal of Economics, 1981, p.583. 18 M. Richardson, Content Protection with Foreign Capital, Oxford Economic Papers, Vol. 45, 1993, pp. 103 ­ 117. 19 R.A.Beldabos and L. Slewagen, Local Content Requirement and Vertical Market Structure, European Journal of Political Economy, Vol. 13, 1997, p. 101. 20W. Gu, and S. Yabbuchi, Local Content Requirements and Urban Unemployment, International Review of Economics and Finance, Vol. 12,2003, p. 481. 21 Stephen E. Guisinger, et al, Investment Incentives and Performance Requirements: Patterns of International Trade, Investment, New York: Praeger, 1985. 22 M. Hao, M. Mackenzie, A. Pamerant and K. Strachan, Local content Requirements in British Columbias Wind Power Industry, Pacific Institute for Climate Solutions, 2010. 23 P.Heum, C.QuaceJ.E.Karlsen,M.Kragha and G. Osahon Enhancement of Local Content in the Upstream Oil and Gas Industry in Nigeria: A Comprehensive and Viable Policy Approach, Joint Study by SNF Institute for Research in Economics and Business Administration, Bergen, Norway, SNF Report No. 25/03,Agust2003. 24 INSTSOK, Norwegian Oil and Gas Partners, Enhancement of Local Content in the Upstream Oil and Gas Industry in Nigeria, a study sponsored by the Norwegian and the Nigerian Governments,2003. 25 J.Jensenand D.Tarr, Impact of Local Content Restrictions and Barriers against Foreign Direct Investment in services: The case of Kazakhastans Accession to WTO, Eastern European Economics, Vol.46, No.5, 2003, pp. 5 ­ 26.
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Z.Wang, and S.Wei, (2012)26, C.KwonOgkandB. G.Chun(2009)27,S.Lahiri and F.Mesa (2006)28,Y. Li, A.Lim and B. Rodriguez, (2007)29. All the above academic literature has no connotation with global trade and investment laws. In contrast, however, the incumbent research underscores the rapport between international trade and investment regulations on the one hand, and the Nigerian Local Content Act 2010, on the other hand.
3. Theoretical and Practical Significance of the Study 3.1Theoretical Significance of the Study i. Legislative Insight and Assistance in Law Making Process. The Nigerian parliament and, indeed, the world at large, are expected to find this dissertation a useful companion and hand book in the task of amending and / or reviewing the Local Content Act. The research shall provide guidance to the legislature in passing future enactments devoid of antagonism with Nigerias international obligations. ii. Instrument for Policy Formulation for the Executive and Government Agencies The executive arm of government, particularly the Ministry of Foreign Affairs, and other agencies of government involved in the business of foreign policy formulation shall rely on this work as an authority while initiating policies to bring them in tandem with Nigerias foreign policy objectives. The centerpiece of Nigerias foreign policy is respect for international law, equal treatment of all persons without discrimination and international cooperation.
26 R.Koopman, Z.Wang and S.Wei, Estimating Domestic Content in Export when Processing Trade is Pervasive, Journal of Development Economics, Vol.99, 2012,pp.178 ­ 189. 27 C.KwongandB. G.Chun, Local Content Requirement Under Vertical Technology Diffusion and Review of Development Economics, 13 (1), 2009, pp.111 ­ 124. 28 S. LahiriandF. Mesa, Local Content Requirement on Foreign Direct Investment Under Exchange Rate volatility, International Review of Economics and Finance,Vol.15, 2006,pp.346 ­ 363. 29 Y.LI, A.Lim and B.Rodriguez, Global Sourcing Using Local Content Tariff Rules, IIE Transaction, Vol.39, 2007,pp.425 ­ 435.
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iii. Aid to Law Teachers and StudeOnkts Learned scholars engaged in the teaching of international law and students of international law shall depend on this work as an encyclopedia of the relationship between WTO Law and domestic legislations. Under international jurisprudence, municipal law cannot be invoked to paralyze international obligation of states. iv. Reference Material to the Nigerian Judiciary and other International Tribunals Nigerian courts and other international tribunals shall have recourse to this research as a panacea for resolving conflict between municipal and international law. v. Invaluable Asset for Research Institutions. Research institutions in Nigeria and across the globe shall resort to this work on questions of law relating to oil and gas industry. In particular, the Nigerian Institute of Legislative Studies, the Nigerian Institute of International Affairs and the Nigerian Institute of Advanced Legal Studies will make references to this research while propounding law reforms to be undertaken in the oil and gas sector. 3.2 Practical Significance of the Study. The practical achievements of this research, it is submitted, can be demonstrated in the underlisted and discussed merits. i. Promotion of Foreign Direct Investment in the Oil and Gas Sector of the Nation's Economy A major objective of this research is market access in the oil and gas industry of Nigeria. The dissertation preaches the gospel of liberalization of the industry. The Local Content Act created harsh investment climate in the sector, making it difficult and unattractive to foreign investors. It is settled law, as it is also common knowledge, that a robust friendly investment environment, is a panacea for the inflow of international private
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capital30. Unarguably, therefore, the aOdkoption of the prescriptions of this research is a gateway for massive FDI in the oil and gas sector of Nigerias economy. ii. Promotion of Economic Growth and Development It is settled international trade and investment law, that unnecessary trade and investment restriction stunts and hurts economic growth and development. It is beyond controversy that open, export oriented countries have succeeded in their development efforts, while heavily protected, inward ­looking countries have not.31 Ironically, and laughable too, Nigeria, the 7th largest producer and exporter of crude oil, now import refined petroleum products from other countries, thereby making the nations economy import driven. This ugly situation is attributable to the adverse impact of the Local Content Act, which expelled foreign investors in the industry. None of the nations refineries is working due to lack of skilled manpower, technology and equipment needed in the industry. Inevitably, this research advocates openness in the sector which engineers economic growth and development. iii. Increased Standard of Living for Nigerians The bitter experience of importation of refined petroleum product into Nigeria will become history upon the implementation of this research. This is achievable as private investors in the industry will build local refineries, which will be exporting oil and gas to other countries. More export translates to enhanced GDP and per capita income for Nigerians. This automatically means better standard of living for the citizenry. An eminent guru in WTO Law has concluded, and there is considerable merit in his argument, that a well managed international trade has the potency of lifting millions of people out of poverty.
30 Report of the Executive Directors of the International Bank for Reconstruction and Development(World Bank) on the Convention for the Settlement of Investment Dispute Between States and Nationals of Other States, 1818Nh Street, N.W. Washington, D.C 20433, U.S.A. p.40. paras. 9- 13 31S. Panitchpakdi, The Doha Development Agenda: Whats at Stake for Business in the Developing World? International Trade Forum, August, 2003, available at www.tradeforum.org, accessed on 11th July, 2016.
28 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 32iv. Transfer of Technology Ok World Bank Report on the Treatment of Foreign Direct Investment (FDI)33 has shown that conducive investment environment created by the host state promotes transfer of technology. The local technology and indigenous capacity in the industry are still in the embryonic stage in the country. Invariably, opening up the sector will trigger off technology transfer from foreign investors to Nigerians through frequent capacity building and training of local personnel in the industry. v. Elimination of Foreign Trade and Investment Disputes34 The enactment of the NOGICDA 2010 has sparked off trade rift between Nigeria and her foreign trading partners. In particular, the EU and the United States have complained bitterly against the law. They threatened to sue Nigeria at the WTO Dispute Settlement Body, arguing that the law offends Article 2.1 of Agreement on Trade Related Investment Measures (TRIMS) , and Article XII of GATT 1994, which outlaws Quantitative Restriction of trade.35 In consequence, the US which used to be the largest buyer of Nigerias crude oil has pulled out in protest to this law. Interestingly, however, the application of this research vide amendment of the infringing provisions of the law will eliminate the possibility of the imminent trade dispute between Nigeria and her trading foreign partners. vi. Employment and Wealth Creation The current unemployment rate in Nigeria as at 2016 stood at 23.9 per cent36. Accordingly, one vital practical importance of this work is the creation of job 32 Peter Van den Bossche, The Law and Policy of the World Trade Organization: Text, Cases and Materials, Cambridge University Press, New York, 2005, p.31. 33 World Bank, Report on the Treatment of Foreign Direct Investment, available at www.italaw.com/documents/worldbank.pdf, accessed on 11th July, 2016. 34 CIA World Fact Book 2016 , available at www.theodora.com/wfbcurrent/nigeria/nigeria_economyhtml 35 Concerns Raised By Nigerias Trading Partners on Nigerian Oil and Gas Industry Content Development Act (NOGICDA), Letter Ref. No. WTO 20 /Con/149, dated 11th November, 2014, by the EU and US and addressed to Nigerias Minister of Industry, Trade and Investment. 36 Y.LI, A.Lim and B. Rodriguez, Global Sourcing Using Local Content Tariff Rules, IIE Transactions, Vol. 39, 2007, pp. 425-435.
29 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 opportunities for Nigerians through many oil and gas companies to be floated by Ok foreign investors In support of this claim, until the year 2000, the telecommunication industry in Nigeria was monopolized by the Federal Government with a handful of jobs and its attendant inefficiency. However, the administration of President Olusegun Obasanjo, in the year 2000, broke the yoke and opened up the sector to foreign private investors. The result was a tremendous inflow of many GSM service providers including MTN, Airtel, Glo, Etisalat, etc. Thousands of Nigerians are now gainfully engaged in the sector. The industry is now the most prosperous in Africa with high level of efficient services to the people. Similar achievement can be replicated in the oil and gas industry upon the liberalization of the sector as advocated by this dissertation. 4. Research Methodology To sustain and vindicate the writers arguments, findings and recommendations, a wide range of research methodologies were applied. The combination of those research methods validated the standpoint of the author that the NOGICDA 2010 constitutes an infraction of existing Nigerian legislations, including the constitution, which is the supreme law of the land, the rules of international trade and investment law. The methods employed also established that the NOGICDA 2010 is dangerous to the nations economy. It further confirmed that municipal law cannot be used as a cloak for evading international obligations. The research methods include: 4.1 Case Law Analysis The dissertation analyzed some WTO case law to establish the proposition that domestic enactment like the NOGICDA 2010 cannot be relied on to avoid
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international obligation, as was the casOek with the Nigerian Local Content Act. 37 The decisions of the courts are predicated on Article XVI.4 of the WTO Agreement which states: "Each member shall ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed Agreements." It is a general principle of international law incorporated in Article 27 of the Vienna Convention on the Law of Treaties, 1969, that "A party may not invoke the provisions of its internal law as justification for its failure to perform a treaty." Thus, in the case of Brazil ­ Aircraft (Article 21.5 ­ Canada)38, the Appellate Body held as follows: We note brazils argument before Article 21.5 Panel that Brazil has a contractual obligation under domestic law to issue PROEX bonds pursuant to commitments that have already been made, and that Brazil could be liable for damages for breach of contract under Brazilian law if it failed to respect its contractual obligations. In response to a question from us at the oral hearing, however, Brazil conceded that a WTO members domestic law does not excuse that member from fulfilling its international obligations. In Brazil ­ Retreaded Tyres, the WTO Panel held that the measures of Rio Grande do Sul, a Federating state of the Republic of Brazil, is attributable to Brazil as a WTO member, and Brazil is responsible for ensuring that its constituent states respects Brazils obligation under WTO.39 It is obvious, as shall be demonstrated later in this dissertation, that the NOGICDA undermined Nigerias obligations under the GATT, GATS 1994, the TRIMS and the norms of International Investment Law.
37 Panel Report Nigerian Local Content Act, 2010, para. 45. 38 Appellate Body Report, Brazil ­ Aircraft (Article 21.5 ­Canada), 2000, para. 46. 39 Panel Report, Brazil Retreaded Tyres, 2007, para. 400. See also Understanding on the Interpretation of Article XXIV of GATT, 1994, para. 14 last sentence.
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4.2 Demonstrative Methodology Ok The writer collected data and statistics from the Nigerian Content Development Monitoring Board, the Nigerian National Petroleum Corporation (NNPC) Federal Ministry of Industry, Trade and Investment, Ministry of Petroleum Resources, the EU and the United States. The data so generated were used to demonstrate that the NOGICDA is antithetical to Nigerias economy, existing laws, and to demonstrate that the objectives of the NOGICDA has remained elusive since the inception of the Act. 4.3 Normative/Black Letter Analysis This connotes textual interpretation and analysis of the provisions of a statute. Several sections of the NOGICDA were construed against the background of WTO norms and Foreign Direct Investment norms to establish that the NOGICDA is radically incompatible with foreign trade and investment norms. 4.4 Quantitative and Qualitative Methodology This method involves primary and secondary means of sourcing information to authenticate research findings. The primary method is invoked when questions are thrown to respondents in the affected field and face to face interview conducted while answers are elicited from the respondents to support the claim of the researcher. Secondary sources denotes research materials such as authoritative books in the field of study, articles, journals, periodicals, papers, internet sources, etc. In applying this technique, the writer distributed and circulated questionnaires to officials of relevant government agencies in the Nigerian Oil and Gas Industry concerning the compliance of the NOGICDA with WTO Law and foreign investment regulations, as well as the impact of the Act on the nations law and the economy. Personal interviews were also conducted.
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In addition, the author equally consOuklted books, journals, articles, periodicals, papers of eminent scholars on the subject and internet sources. The information so garnered helped to enrich and sustain the writers proposition. 4.5 Comparative Analysis This mechanism entails comparing two or more legal systems to determine the similarities or divergence existing in the two legal regimes. The relevant provisions of the NOGICDA were thoroughly scrutinized and compared with other jurisdictions such as Brazil, Norway, Trinidad and Tobago and Malaysia. It was uncovered that the Nigerian version of Local Content Law is too rigid and inconsistent with international law quite unlike its counterparts surveyed in the study. 5. Innovation Plan and Perspective of the Study A number of salient innovations and strategic plans have been introduced in this dissertation to reform the Nigerian Oil and Gas sector of the nations economy. The innovations involve both legal and structural reforms to make the industry economically viable and boost Nigerias economy. The new initiatives and policy framework include: 5.1 Deregulation of the Oil and Gas Industry A legal reform to restructure the nations oil and gas industry and make it private sector driven and competitive is hereby advocated. Government is known as a bad business manager. The current situation where the law allows only the NNPC to refine petroleum product in the country creates monopoly in the industry. At present, Nigeria with a population of over 170 million people has only 3 refineries in Port Harcourt, Warri and Kaduna. The refined petroleum products from these refineries are grossly inadequate to meet the daily consumption need of the country let alone for export.
33 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 This accounts for incessant fuel scarcOitky and its attendant high price. This causes high transportation fare and high cost of goods and services, which in turn, leads to inflation in the country. It is unimaginable that Nigeria, the 7th largest producer and exporter of crude oil in the world still imports refined petroleum products from other countries, thereby losing huge foreign exchange earnings to other countries. It is, therefore, hoped that the privatization of the sector will make the industry competitive and economically viable. This strategy has made the telecommunication sector a flourishing industry in Nigeria and can still work for the oil and gas industry. 5.2 Elimination of Duplication and Overlapping of Functions in the Sector For an efficient service delivery and productivity in the industry, the writer has identified duplication and overlapping of functions as a serious obstacle to the success of oil and gas industry in Nigeria. The NNPC Act vest management and supervisory powers of the sector in the NNPC. In the same vein, the Petroleum Act 1969, vest the same powers in the Minister of Petroleum Resources. The law also authorizes the Department of Petroleum Resources(DPR), to perform some of the functions already vested in the foregoing authorities. Recently, the NOGICDA 2010 empowered the Nigerian Local Content Development Monitoring Board to undertake some of the functions performed by the DPR. This leads to power tussle in the industry. Consequently, appropriate law reform to clearly separate the functions of the relevant agencies in the sector has been introduced in this research. 5.3 Departure from Oil to Economic Diversification Another new dimension of this research is the prescription of a shift from dependence on oil as a sole revenue earner of government, to diversification to solid minerals and agricultural resources.
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The dramatic fall in the price of cruOdke oil at the international market since last quarter of 2015 has adversely affected Nigerias economy. Naira, the nations currency, has fallen against US Dollars to the tune of over 300 naira to a dollar, as against the previous 150 naira to a dollar. High cost of living is now the order of the day as inflation has risen to as high as 15 per cent. Again, the oil and gas reserve in the country shall one day dry up as the same cannot last forever. Nigeria is blessed with countless solid mineral resources and arable farmland for bountiful harvest. Before the oil boom in Nigeria, the country was a major exporter of cash crops to other countries. This was in the late 1970s and early 1980s. The nations economy at this period sound and the GDP of the country was high. There are abundance of coal, lead ore, zinc, lime stone deposit, etc in the country. An effective exploitation of these natural resources coupled with mass production of rice, cassava, cotton, wheat, rubber, cocoa, etc for export will reposition the nations economy. At present, Nigeria spends billions of dollars annually on importation of foreign rice. The diversification of the economy will save billions of dollars for the country and the export of agricultural products will earn foreign exchange for Nigeria and remove over dependence on oil revenue. 5.4 Indigenous Control of Oil and Gas Resources by Oil Producing States The writer introduced the concept of resource control by oil producing states in Nigeria and payment of royalties to the federal government. Section 43 of the Constitution of Federal Republic of Nigeria, 1999 (as amended), and the 1969 Petroleum Act vest the absolute ownership and control of oil and gas resources in the federal government. The result is the politicization and poor management of the sector by the political elites.
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Nigeria operates a federal system of Ogkovernment. In a true federalism like the United States, natural resources are controlled by the states where such resources are located, who in turn pays tax to the central government. Furthermore, international instruments support permanent sovereignty over natural wealth and resources by the indigenous people. Prominent among such international instrument is Article 26 and 27 of the UN Declaration on the Rights of Indigenous Peoples, 2007.40 The indigenous people of Niger-Delta of Nigeria, the oil producing states, have been utterly neglected, underdeveloped and their environment badly damaged by oil pollution. Greater attention and prudent management of the oil and gas resources will be achieved if the oil producing states are authorized to control and manage the resources. 5.5 Stamping Out Corruption in the Oil and Gas Industry The hydra headed monster called corruption has been identified by this research as the bane of development of the oil and gas sector of the Nigerias economy. The author discovered that billions of dollars that could have been utilized to reposition the industry and provide the needed infrastructure for the county are siphoned into private pockets to the detriment of the sector and the nation at large. It was revealed that there is lack of political will by successive regimes in the country to fight the scourge. Many high profile cases involving top government officials were swept under the carpet. Others enjoyed endless adjournment in the law courts. The punishment prescribed for culprits of the menace by the Anti-Corruption Act is grossly inadequate. In January 2016, a Forensic Audit Report conducted by the Federal Government, indicted the management of NNPC for mismanaging $1.48 billion US Dollars.41
40 See also the Convention Concerning Indigenous and Tribal Peoples in Independent Countries, 1991, No. 1691, Article 15 thereof. See further Articles 1 ­ 8 of the UNGA Resolution 1803 (XVII) of 14 December, 1962.
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The Halliburton scandal in the NigeriaOLk iquefied Natural Gas (NLNG) revealed that 180 million US Dollars were siphoned into private pockets during the period under review.42 The 2013 NEITI Report also stated that 3.8 billion US dollars was looted in the industry during the period under review. The list is endless. It is against this backdrop that this research proposes life imprisonment as penalty for persons convicted of the offence of corruption. Creation of special courts for expeditious trial of cases of corruption is another innovation introduced by this dissertation. The Anti-Corruption institutions like the Economic and Financial Crimes Commission (EFCC) and the ICPC should be strengthened to enable them perform optimally. Government must declare total war against corruption in the country where there will be no sacred cows. 5.6 Emphasis and Reliance should be placed on Renewable Energy Nigeria loses billions of dollars on supply of gas to various gas power plants for electricity generation. Electricity generation in Nigeria is a far cry to the need of the people. This has not been successful due to shortage of gas supply, pipeline vandalism, lack of maintenance of the gas plant, etc. It is estimated that Nigeria requires 40,000 Mega Watts of electricity to service the nation. Currently, the country generates less than 4,000 mega watts, which is grossly inadequate for the country. Nigeria has abundant solar energy, coal deposit, solid waste and rivers which if properly harnessed could generate sufficient energy for the country. This has become imperative now that the Climate Change Convention 2016 on the reduction of green house gas emission has become operational. A shift from fossil
41 Federal Government of Nigeria Forensic Audit Report on the financial Transactions of the NNPC conducted by the Price Water House Coopers Firm, as reported by the Premium Times Newspaper of 4th January, 2016. Available at http://www.premiumtimesng.com/, accessed on 16th July, 2016. 42 O. E. Anthony, NEITI and Good Governance in the Nigerian Oil Industry, AMBIK Press, 2011, p. 267.
37 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 fuel energy to renewable clean energy Oisk another innovation advocated by this dissertation. Chapter 1 Background of the Study 1. Introduction The increased agitation for Local Content Requirements by natural resources endowed developing nations in recent years is engineered by the irony of resourcecurse theory. The proponents of this theory argue that states, with over reliance on natural resources, such as oil and gas, are the most underdeveloped and performs magnificently poor than their counterparts without such resources. 43 Other apostles of this theory prophesy dooms for resource-rich nations. They postulate that from experience, dramatic upsurge in mineral resource revenue, may jeopardize economic development of a state, ignite political upheaval, sky-rocket social inequality and hinder smooth democratic processes.44 The above observations are true for Nigeria whose discovery of oil and gas plunged the nation into wide spread corruption, underdevelopment, poverty, 48 T.L.Karl, The Paradox of Plenty: Oil Booms and Petro-states (Berkeley, CA: University of California Press) 1997. See also M.L.Ross, The Political Economy of the Resource Curse, World Political, 51 (2), 1999, pp. 297 -323. See equally and R. M. Auty, Industrial Policy Reform in Six Large Newly Industrializing Countries: The Resource Curse Thesis, World Development, 22.1: 1994,pp. 11 ­ 27. 44 J. D. Sachs and A. M. Warner, Natural Resource Abundance and Economic Growth, NBER Working Paper N0. 5398, National Bureau of Economic Research, Mass Cambridge, 1995,p.1.
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unemployment, military coup and counOtker coup as well as Civil War, between 1967 ­ 1970. Collier Paul, another disciple of the paradox of resource ­ rich curse, asserts that, according to World Bank indicators, a country is more vulnerable to underdevelopment and massive corruption as it depends on one or a handful export commodities, particularly oil.45 The discovery of oil and gas in Nigeria at Oloibiri, the present Bayelsa State, dates back to 1956. The industry was controlled by IOCs and multinational corporations, during and after colonial era. It is worthy of note that Nigeria is the 7th largest producer and exporter of crude oil in the world. Sadly, six decades after the oil boom in the country, Nigeria still ranks among the poorest developing countries in the world. In order to address this anomaly and debunk the resource rich curse syndrome, the NOGICDA was enacted in 2010 to guarantee indigenous domination of the sector for value addition and to foster national development. The overriding objective of the Act is to develop indigenous service providers, and the utilization of local goods, services and labor in the industry to promote economic growth and development. Certain regulatory and institutional frameworks were introduced in the Act to achieve these laudable objectives. The new measures provided for certain preferential and discriminatory treatment in favour of Nigerias service providers, indigenous goods and services, operators, companies and personnel in the industry. Unfortunately, the measures impinged on Nigerias international obligations under the WTO TRIMS, GATT, GATS 1994 and the norms of Foreign Direct Investment (FDI). An investigation into the offending provisions of the Act and their legal and economic consequences is the main purpose of this research.
45 P. Collier, Economic Causes of Civil Conflicts and their Implications for Policy, Development Research Group, World Bank, Washington, D.C, 2000, p.1, available at http://people.umass.edu/educ870/postconflict/resources/causesofconflict - collierwB pdf, accessed on 19 July, 2016.
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This chapter examines internationalOklegal instruments in support of Nigerias Local Content Policy, theories sustaining the policy, historical background of Nigerian oil and gas law and the main problems stunting the growth of the sector.
1.1 International Legal Instruments in Support of Local Content Law Nigerian government found support for the passage of the NOGICDA on a number of international legal instruments. Chief among such instruments is Articles 1 ­ 8 of the UNGA Resolution 1803 (XVII) of 14 December, 1962. The resolution declared and upheld the ,,permanent sovereignty of indigenous peoples and states over their natural wealth and natural resources without invasion of such right by external forces. Subsequently, Articles 26 and 27 of the UN Declaration on the Rights of Indigenous Peoples, 2007, further reaffirms the right to permanent sovereignty o states over their natural wealth and resources. Earlier, in 1974, the UNGA adopted the Charter on Economic Rights and Duties of States, which consolidated the sovereign rights of states to manage and regulate their natural wealth in accordance with their domestic laws and regulations.46 Article 2 paragraph 1 of chapter 2 of the charter authorizes every state to fully and freely exercise permanent sovereignty, including the right of possession, use and disposal of their natural wealth and resources, and other economic activities. Pursuant to Article 2 paragraph 2 (a) therein, each state has right to regulate, supervise and exercise authority over all foreign investments within its national jurisdiction, in accordance with its laws, regulations, national objectives and priorities (underlined emphasis added). Article 2 sub article 2 paragraph 2 of the charter authorizes every state to regulate the activities of transnational corporations in accordance with its laws,
46 See UN Charter on Economic Rights and Duties of States, adopted on 12 December, 1974 by UNGA Resolution 3281 (xxix).
40 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 regulations to conform with its nationaOlkeconomic and social policy. (underlined for emphasis). Nigeria also exonerates its local content law on the basis of the UN Declaration on the Programme of Action on the Establishment of a New International Economic Order, which supports permanent sovereignty over natural wealth and resources, and self determination of states.47 On the strength of the above legal instruments, Nigeria claims it has the legal right to enact the Local Content Act, 2010, to regulate the activities of IOCs operating in the nations oil and gas industry. 1.2 Theories Sustaining the NOGICDA 2010 1.2.1 Strategic Sector Theory There is consensus among economics scholars that some sectors of the economy are more sensitive and importance owing to their strategic nature. Sectors such as energy, transportation and communication have been identified as very strategic to a nations economy. The geometric rise in security concerns among nations in recent years further justifies some elements of protection for these vital sectors of the economy.48 This accounts for the series ownership and control restrictions placed on such sectors to guarantee optimal performance. 1.2.2 Social Compensation Theory Oil and gas operations have adverse effects on the host communities. Oil spillage and gas flaring destroys the eco system, aquatic resources and causes environmental degradation. This has far reaching consequences on the social life and activities of the host communities. 49 This awesome damage has to be 47 UNGA Resolution 3201 (s-VI) and Resolution 3202 (S-VI) of 1 May, 1974. 48 P. Enderwick, Understanding the Rise of Global Protectionism, Thunderbird International Business Review, Vol. 53, No. 3, 2011, pp. 325 ­ 336. 49 O. R. Ogri, A Review of the Nigerian Petroleum Industry and the Associated Environmental Problems, The Environmentalist, Vol. 21, 2001, pp. 11 ­ 21.
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compensated through job creation, awarOdkof contracts for the indigenes of the host community (local content policy). The Niger Delta people of Nigeria, the oil producing region of the country, have become volatile security wise. The youth restiveness and militancy is the ventilation of the peoples grievances for their exclusion in the oil and gas industry, and the menace to their environment. Local Content Policy is therefore justified to arrest this ugly situation.
1.2.3 Protection of Infant Industry Theory The infant industry theory was propounded by a renowned one time United States Secretary for the Treasury, Alexander Hamilton, in 1791. The theory was subsequently popularized by Fredrick List.50 The theory argues that the emerging local industries which are susceptible to external shocks, are denied the economies of scale advantage, and cannot favourably compete with their international opponents that are already strong, producing goods that are not substitute for local products. There is, therefore, the need to shield the infant industries from foreign competition until such a period they can favourably compete with their foreign counterparts. Infant industry argument is perhaps, the oldest and the most potent protectionist weapon employed to protect young industries, especially in developing country like Nigeria. The United States, the originator of the theory, applied it during the countrys industrialization era against British monopoly of international trade in the 17th Century. Many developing countries including China, South Korea, India, Brazil, South Africa, have used one form of local content policy in the critical sectors of their economies. This is why local content policy is a viable option for the Nigerian oil and gas industry to usher in the needed development of the country.
50 M.J. Melitz, When and How Should Infant Industry be Protected? Journal of International Economics, Vol. 66, 2005, pp. 177 ­ 196.
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1.2.4 Market Power Theory
Ok
Market power here refers to ,,foreign suppliers purchasing power to the detriment
of domestic enterprises. Foreign suppliers of goods and services have been found
to be using this tool to compete with local manufacturers indiscriminately. A
distinction has been drawn between market power and infant industry theories.
Under infant industry theory, local firms enjoys advantage from local content
requirements; but under market power theory, local content specifications are not
meant to confer benefit to the local industry rather, it is applied to absolve the
domestic firms from disadvantaged position.
It is not in doubt that IOCs in Nigeria have unduly invoked this theory in the
supply of virtually all machines and equipments used in oil and gas operations in
Nigeria, which justifies the enactment of the NOGICDA to eliminate the undue
disadvantages faced by local manufacturers and service providers.
1.2.5 Political Unity Theory.
Local Content Requirement can be employed as a weapon for realizing certain
political goals and harmonious co-existence of the society. Political harmony here
signifies marrying together the interest of government with that of the society to
achieve tranquility. The strategy is recording considerable success in Niger Delta
Region of Nigeria, where amnesty programme was used to calm down arid youths,
who were destroying oil installations in protest for the non-inclusion of their
people in the oil and gas industry. It was equally applied in Sierra Leon and Liberia
to achieve political harmony the civil unrest in those countries. The policy communities, resolving conflicts as well as conflict reoccurrence.51
51 A. Rabiu, Local Content Policy and the WTO Rules of Trade ­Related Investment Measures (TRIMS): The Pros and Cons, International Journal of Business and Management Studies, 2013, p. 142.
43 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 1.3 Problems Facing the Nigerian Oil and Gas Industry. Aside the shortcomings of the NOGICOkDA 2010, there are series of other serious challenges plaguing the oil and gas industry in Nigeria. A highlight of the major obstacles to the growth of the sector and the economy in general, and way out of the menace are herein advanced. 1.3.1 Oil Theft, Illegal Bunkering and Piracy. The 1999 Constitution of the Federal Republic of Nigeria (as amended) and the Petroleum Act, 2004 vests the absolute ownership, control and management of oil and gas , whether onshore or offshore, in the federal government.52 Therefore, any individual or corporate entity who wishes to engage in any oil and gas operation can only do so through license or permit from the Federal Government or any of its authorized agencies. Unfortunately, reverse is the case as the activities of unlicensed persons in the sector have become the order of the day. This has led to loss of huge revenue by the Federal Government. As at 2007, the FG reported that it loses $14 billion US Dollars annually to oil theft and illicit oil bunkering.53 In 2012, the Federal Government again reported that it loses over 1 billion United States Dollars on monthly basis to the activities of oil theft dealers and sea pirates.54 The report went ahead stating that no fewer than 100, 000 to 250, 000 barrels of crude oil are stolen on daily basis by the dealers of this illicit trade. According to 2015 report, the figures rose to 300, 000 to 400, 000 barrels of crude oil per day. This represents 1.7 billion United States Dollars in a month.55 These gold diggers perpetrate their nefarious activities by tapping from vandalized oil pipelines, stealing from oil wells in the field, building and 52 See section 43 of the 1999 Constitution of FRN (as amended) and Section 1 of the Petroleum Act, Cap. 10, Laws of the Federation of Nigeria, 2004. 53 See A. Olubayo, Federal Government Loses 14 billion US Dollars to Oil Theft, This Day Newspaper, 28 August, 2007, p 1. 54 See B. Adegoke, Federal Government Loses Over 1 Billion US Dollars Monthly to Oil Theft, Vanguard Newspaper, 4 June, 2012, p 1. 55 Emily Mangan, A Primer on Nigerias Oil Bunkering, a Guest Post by an Intern at the Council on Foreign Policy, Skidmore College, 4 August, 2015. Available at http://blogs.cfr.org/campbell/2015/08/04/a-primer-onnigeria-oil-bunkering/.
44 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 maintaining illegal oil refineries, etc. This portends economic and environmental Ok disaster for the country. An effective Ocean governance to police the high sea and the creeks to get rid of these bandits is needed as a matter of urgency. Nigeria should also enter into Bilateral Treaties with neighbouring states who patronize the dealers of the illegal trade to curb the menace. There is need to train and equip officials of National Oil Spill Detection and Response Agency (NOSDRA) for effective monitoring of oil pipelines and rapid response to oil spills. 1.3.2 Insecurity in the Oil Rich Niger Delta Region. The oil rich Niger Delta region has turned into a battle field in recent years by the relentless activities of militant groups and youth restiveness. These arid youths are agitating for their long years of marginalization, exclusion in the oil and gas industry, and severe damage to their environment. Yesterday, it was Movement for the Emancipation of Niger Delta (MEND). Today, it is Niger Delta Avengers (NDA) and Red Scorpion. The stock in trades of these fierce armed groups are wanton destruction of oil installations, senseless killings and kidnapping of oil workers in the region. This has forced some oil companies to shut down while others fled the region. The FG incurs colossal losses of billions of dollars from the activities of these militant groups. In July 2016, NDA destroyed AGIP and Shells oil pipelines at Nembe, Brass to Bonny Trunk Lines in Bayelsa State.56 The groups also blew up oil pipeline to Kaduna refineries.57 The FG should engage the groups in dialogue to find lasting solution to the lingering crisis. The amnesty programme initiated by the previous regime which calmed the situation should be reintroduced and sustained. More involvement of 56 Available at http://www.nairaland.com/31819/, See also P. Oluremi, Niger Delta Avengers Destroyed AGIP and Shells Oil Pipelines at Nembe, Brass to Bonny Trunk Lines in Bayelsa State, Daily Sun Newspaper of 23 July, 2016, p. 1. 57 Saharareporters.com/2016/05/06/niger-delta-avengers-blow-oil-23-july-2016/.
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the people of the region in the oil aOnkd gas industry should always form the cornerstone of government policy. True federalism and resource control by oil producing states should form part of the nations constitution to put an end to the conflict. 1.3.3 Poor Funding of Science and Technology and Research Institutions Oil and gas operations are capital intensive. It requires highly skilled manpower to blossom. Although Nigeria has established University of Petroleum in Delta State, Petroleum Polytechnique in Bayelsa State, National Office of Technology Acquisition and Promotion (NOTAP), National Energy Commission and National Agency for Science and Engineering, they are all poorly funded. In 2016 national budget, the education sector received 369.6 billion naira which is less than 15 per cent of the total budget. This is far below the 26 per cent benchmark of the United Nations Education, Scientific and Cultural Organization (UNESCO). Where the research institutions have made a discovery, government seldom fund the development and commercialization of the findings. It is therefore suggested that adequate attention be given to science education in Nigeria. More funds should be made available to research institutions to million US Dollars the Petroleum Technology Development Fund (PTDF) should be encouraged with sufficient funds to expand its scope of operation to accommodate funding of research in the sector and transfer of technology. 1.3.4 High Level Corruption in the Sector. The greatest challenge facing the oil and gas sector in Nigeria is corruption. Billions of United States Dollar is lost annually to corrupt practices in the industry. On Saturday, the 7th day of January, 2017, it was shockingly reported that a Federal High Court sitting in Lagos State of Nigeria, ordered Mr. Alison Madueke, former Minister of Petroleum Resources , to refund the sum of one hundred and fifty three million US Dollars she embezzled in the sector to Federal Government
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treasury.58 The funds were misappropriaOtked and lodged in three separate accounts belonging to the minister in three different Nigerian banks. Such huge revenue would have been invested in other key sectors of the economy as a means of boosting and diversifying the nations economy. As noted above, several other billions of dollars were lost to oil bunkering and / or oil theft. The NNPC has also been indicted on many occasions by NEITI for misappropriating millions of US Dollars in the industry. 1.3.5 Duplication of Functions and Power Tussle Overlapping of function is, perhaps, a major weakness of the NOGICD Act, 2010. There are other Federal Government Agencies already assigned with similar responsibility now being performed by the NCDMB under the NOGICD Act. For example, the Department of Petroleum Resources (DPR) under Ministry of Petroleum Resources, is empowered to grant oil prospecting licenses, oil, mining lease and to supervise multinational oil corporations to ensure compliance with rules and regulations governing the oil industry in Nigeria. In addition, the DPR is also authorized to ensure that Nigerian Local Content is reflected in every enterprise engaged in oil and gas sector of the Nations economy. What is more, the NOTAP is empowered to ensure transfer of technology to Nigerians where a foreign firm with scientific and technological flavor has invested in Nigeria. Furthermore, the Nigerian Science and Engineering Commission, the Petroleum Technology Development Fund (PTDF) and the Nigerian Petroleum University all have the core mandate of transferring petroleum technology to Nigerians. It is therefore advocated that the existing institutions should be strengthened for optimal performance rather than creating new ones.
1.4 Conclusion 58 See S. Adeniyi, Federal High Court Orders Former Minister of Petroleum Resources to Refund the sum of One Hundred and Fifty Three Million US Dollars she Embezzled in the Sector to Federal Government Treasury, The Daily Trust Newspaper of 7th January, 2017, p. 1.
47 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 This chapter has established that thereOkare several international legal instruments in support of local content policy chief among which include: the UNGA Resolution on permanent sovereignty over natural resources, the New International Economic Order, the economic rights and duties of state. There are also theories in favour of local content policy such as the Infant Industry Protection, Social Harmony Theory, Political Unity Theory, among others. The problems confronting the Nations Oil and Gas Industry were identified and there solutions proffered. The main problem is that of corruption. Chapter 2 An Overview of Oil and Gas Law in Nigeria 2. Historical Background of Oil and Gas Legislation in Nigeria Although the first oil well was discovered in 1956 by Shell Petroleum Development Corporation (SPDC) at Oloibiri, the present Bayelsa State of Nigeria, The Petroleum Ordinance of 1889 was the first piece of legislation regulating oil and gas activities in Nigeria.59 This was followed by the Mineral Oil Regulation Ordinance of 190760. The duo enactments were promulgated by the British colonial overlords in Nigeria. It vested absolute ownership of oil and gas resources in the British crown. The two legislations handed down the basic principles for the development of oil and gas resources in Nigeria. In 1914, the Mineral Oil Ordinance was passed into law by the British Crown. Like the 1907 Ordinance, this enactment was detrimental to Nigerians, the landlord of the oil and gas resources. Accordingly, section 6 (1) (a) of the enactment provides inter alia, that "No lease or licence shall be granted to 59 L.Atsegbua, Oil and Gas Law in Nigeria: Theory and Practice(3rd Edition), Fifers Lane Publishers, Benin City, Nigeria, 2012, p.42. 60 A. K. Mgbolu, Petroleum Act with Some basic concepts in Oil and Gas Law in Nigeria, WillyRose& Appleseed Publishing Coy, 2008, p. 1.
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anyone except a British subject or comOpk any". Paradoxically, however, it was the German Bitumen Company that heralded the exploration of oil in Nigeria in 1908. Exploration of oil and gas resources in Nigeria was also ignited by Order N0. 19 of 1909, which granted oil prospecting licenses (OPL), to oil companies to undertake oil exploration in Southern Nigeria. 61 A major enactment in the sector came to lime light in 1958 with the promulgation of Mineral Oil Ordinance Cap 120, Laws of the Federation of Nigeria, 1958. The ordinance regulated the right to search for, win and exploit oil and gas resources in Nigeria. The activities of Multinational Oil Corporations (MNOC) were temporarily halted following the hostilities of the First World War. Interest in oil prospecting and exploration was revived in 1937 after the cessation of the hostilities. In November 1938, Shell Petroleum Development Company was granted Oil Exploration License (OEL) covering the entire country by the British colonial government.62 The search for oil in Nigeria was again interrupted for a period of five years following the break out of the Second World War. Exploration activities were, however, intensified by Shell BP between 1946 to 1951. As noted earlier, a major breakthrough ensued with the discovery of oil in commercial quantities at Oloibiri town of Bayelsa state in 1956. The discovery was rapidly developed and by 1958, oil production has commenced in Nigeria.
2.1 Analysis of Principal Oil and Gas Statutes in Nigeria The advent of oil and gas resources in Nigeria has propelled the enactment of several laws and regulations for the control of oil prospecting, exploration, production, transportation, storage, distribution and marketing. However, adequacy and effective application of such laws remains elusive. 61 Y. Omorogbe, The Legal Framework for the Production of Petroleum in Nigeria, JENRL No. 4, 1987, p. 273. 62 (1961) 1 ALL NLR 646.
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"Statute" was interpreted by the SuprOekme Court of Nigeria in Queen v Bukar to include Ordinance, Laws, Acts, Regulations, Order and other instruments having the force of law. This encompasses the constitution, principal legislations, subsidiary legislations such as regulations, rules, bylaws, orders and international treaties ratified and domesticated in conformity with section 12 of the 1999 Constitution of Nigeria (as amended) by the National Assembly. It provides that "No treaty between the Federation and any other country shall have the force of law except to matters not included in the exclusive legislative list for the purpose of implementing a treaty". The Supreme Court of Nigeria, while construing the above provision in Ibidapo Obe v. Lufthansa Airlines63 held that domestication of a treaty makes it enforceable in Nigeria, and where there is a conflict between the treaty and another statute, treaty provision will prevail, as it is presumed that the legislature does not intend to breach an international obligation. The same view was upheld by the apex court in Abacha v. Fawehinmi64. 2.1.1 The Petroleum Act of 1969 (as amended)65 The Petroleum Act as variously amended in 1972, 1973, 1998 and as revised in 2004 Laws of the Federation of Nigeria, is a major principal statute governing oil and gas operations in Nigeria. It came into force on the 27th day of November, 1969. The Act embodies sixteen sections and four schedules. The preamble of the Act reads thus: "An Act to provide for the exploration and the continental shelf of Nigeria and to vest the ownership of all on-shore and off-shore revenue derivable from petroleum resources in the Federal Government and for other matters incidental thereto". Section 1 (1) of the Act provides that the entire ownership and control of all petroleum in, under or upon any lands to which this section applies shall be vested
63 (1997) 4 NWLR [498] p. 124. 64 (1997) 4 NWLR [pt . 498] p. 10. 65 Cap. P10 Laws of the Federation of Nigeria, 2004.
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in the state. The land area to be covOekred by the Act is copiously defined in subsection 2 of section 1 to include: a.All lands in Nigeria b.Under the territorial waters as defined by the Territorial Waters Act of Nigeria c.Land forming part of the continental shelf of Nigeria d.Lands forming part of the Exclusive Economic Zone (EEZ) of Nigeria. Section 2 of the Act encapsulates procedures for acquiring interest in Oil Exploration License (OEL), Oil Prospecting License (OPL) and Oil Mining Lease (OML). By virtue of section 2 (1) of the Act, the minister of petroleum may grant a license to be known as an Oil Exploration License to explore for petroleum resources In paragraph b of section 2, the minister may grant a license to be known as an Oil Prospecting License, to search for petroleum resources. Under paragraph c of the said section 2, the minister may grant a license to be known as Oil Mining Lease to search for, win , work, carry away and dispose of petroleum. The minister may also grant license to interested investors to establish, own and operate oil refineries in Nigeria. 66 This power is predicated on payment of prescribed official fees and satisfaction of requisite conditions as may be stipulated by the minister, who is answerable to the President of the Federation. Section 4 contain provisions for control of petroleum products thus: 4(1) subject to this section, no person shall import, store sell or distribute any petroleum products in Nigeria without a license granted by the Minister.67
66 See section 3 of the Petroleum Act, cap. LFN, 2004,p.10. 67 In sub-section (2) (a) it was stated that obtaining license shall not apply storage, sale or distribution of not more than 500 litres of kerosene, and such other categories of petroleum product as may be exempted from the application of subsection (1) as ay be published in the Federal gazette and (2) (b) provides that storage of petroleum products under taken otherwise than in connection with the importation, sale or distribution of petroleum products.
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Section 4 (6) provides on the punishmOkent for operating contrary to the law thus: Any person who does, without the appropriate license, any act for which offences was committed shall be forfeited. Section 6 relates to the power of the Minister to control price. This is important as the populace often protest any increase in price of petroleum products particularly, on fuel or kerosene prices. The effect of increase in such prices affect virtually all sectors of the economy. Section 7 relates to rights of pre-emption which is hinged on emergency situations whereby it is expected that the Minister must inform the President on the low level of availability of petroleum and petroleum products68 and if the President is satisfied shall declare a state of national emergency. Section 9 (b) contains regulations which relate generally to: i. Safe working; ii. The conservation of pollution of water courses and the atmosphere; iii. The keeping and inspection of records, books, statistics accounts and plan; iv.The measurement of product; and, v. The measurement of crude oil delivered to refineries interestingly section 9 (c) provides regulations and construction, maintenance and operation of installations used in pursuance of this Act. Instructively section 9 (1) (e) provides regulation in relation to importation, handling, storage and distribution of petroleum, petroleum products and other inflammable Oils and liquids and in particular (without prejudice to the generality of the foregoing): (i) Prohibiting the importation or exportation of petroleum or petroleum products except specified port or places; (ii) Prescribing the notice to be given (and by whom the same shall be given) on arrival at a port of a ship carrying petroleum or petroleum products as cargo;
68 Section 7 (5) of the Petroleum Act.
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(iii) Defining dangerous petroleum aOnkd dangerous petroleum products as cargo and requiring those ships to proceed to and remain at those anchorages; (iv) Regulating the loading, unloading, transport within a port, landing transshipment and shipment of petroleum and petroleum products. (v) Providing for the licensing of lighters and other Graft to carry petroleum and petroleum products within a port; (vi) Prescribing conditions and restrictions to be imposed upon vessels arriving at a port after having carried petroleum, petroleum products, or dangerous petroleum products; (vii) Providing for examination and testing of petroleum tests to be applied to ascertain its and petroleum and flash points and the method of applying those tests; and petroleum products and prescribing. (viii) Subject to subsection (2) of this section, regulating transport of petroleum and petroleum products prescribing the quantity of petroleum and petroleum products which may be carried in any vessel, cart, truck, railway wagon or other vehicles, the manner in which they shall be stored when being so carried the receptacles in which they shall be contained when being so carried and the questions to be contained in those receptacles, and providing for the search and inspection of any such vessel, cart, truck, railway wagon or other vehicles. The other very important aspect of the Petroleum Act is the provision to have any question or dispute settled by arbitration.69 2.1.2 Deep Off-shore and Inland Basin Production Sharing Contract Act (as Amended)70 This Act is aimed at giving incentives for various exploration and production petroleum activities to the Oil and Gas companies operating in Deep Off-shore and inland basin areas which cover areas like the high seas. Usually the contract
69 In section 11 to wit that the question or dispute shall be settled in accordance with the law relating to arbitration of the appropriate States. 70 It came into force January, 1990 and amended in 1993.
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is shared between the Nigerian NationalOPk etroleum Corporation (NNPC), which is the sole representative of the Federal Government of Nigeria and the Oil companies which may be foreign with some Nigerians being members or solely controlled by Nigerians with some foreign partners. By this arrangement, investors are encouraged to come and part of the Production Sharing Contracts (PSCs). Production sharing contract agreement means any agreement or arrangements made between the corporation or the holder and any other petroleum exploration and production company or companies for the purpose of exploration and production of oil in the Deep off shore and inland basins, while Deep offshore refers to any water with depth beyond 200 metres. Just as Inland Basin means any of the following basins like the Anambra, Benin, Benue, Chad, Gongola, Imo, Sokoto and any other as may be determined from time to time by the Minister. Section 2 of the Act provides that the derivation of prospecting in relation to PSC to be a minimum of Five (5) years and a maximum often (10) years. 2.1.3 Royalty Payable in Deep Offshore Production Sharing Contract The payable royalty is graduated in accordance with the depth of the water as the water gets deeper the payable royalty reduces as illustrated below: a.in areas covering 201 - 500 metre depth, 12 percent of the profit is paid as royalty; b.in areas covering 501 - 800 metres depth, 8 percent of the profit is paid as royalty; c.in areas covering 801 - 1000 metres depth, 4 percent of the profit is paid as royalty; d.While, in areas in excess of 1000 metres depth, no royalty is paid as royalty. While royalty rate in the Inland Basin stand at 10 percent. Yet another form of royalty is duly paid by NNPC (the Holder) and the contractor but this royalty is paid by the NNPC (the Holder) on behalf of itself and the contractor out of the
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allocated royalty oil and tax oil.71 StillOhkere must be separate tax receipts in the names of the NNPC (Holder) and the contractor for the respective amounts of petroleum profit tax paid on behalf of the NNPC (Holder) and the contractor which shall be issued by the Federal Inland Revenue services72 in Gulf Oil Company Nig. Ltd v. Federal Board of Inland Revenue (BIR)73 . This Court held that the payment of Central Bank charges imposed by the Federal Government is an expense incurred in the course of the Appellant's business which is petroleum operation and therefore quality for deduction under section 10 (1) of the Petroleum Profit Tax Act. On the issue of consideration for payment of other charges for services-in the assessment of profit tax payable by companies, the decision in shell International Petroleum BV v FBIR,74the facts of the case was that the Appellant was an Offshore company incorporated in the Netherlands but operates in Nigeria. It has a relationship with Shell Petroleum Development Company of Nigeria (SPDC) was the provision of technical and management services. The Court held that the cost sharing or cost recovery billing system as a basis for assessing tax billing is an alien term to the Nigeria's tax laws. What matters is that the appellant carries on business in Nigeria; that the basis of assessing tax liability is not profit rather it is turn over. 2.1.4 Territorial Waters Act75 What is paramount about this Act is that initially the nautical miles of the coast of Nigeria was limited to twelve nautical miles from the low water mark or of the seaward limits off inland waters.76 Again Territorial water was amended to be thirty nautical miles instead of twelve77in (the Action).
71 Section 11, subsection (1) of the Deep Off shore and inland Basin Production sharing Contract Act, 1993. 72 Section 11, subsection (2), the Deep Offshore and Inland Basin Production Sharing Contract Act, 1993. 73 (1997) 7 NWLR (pt. 514)535. 74 (2004) 3 NWLR (pt. 859). 75 It came into force on 8th April, 1967 as amended in 1998. 76 Section 1 (1) of the Territorial Waters Act.
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However, it must be noted that curOrekntly Nigeria's Exclusive Economic Zone (EEZ) extends to (200) two hundred nautical miles78 seawards from the coast of Nigeria. 2.1.5 The Exclusive Economic Zone (EEZ) Act79 In Nigeria it is the area extending up to 200 nautical miles seawards form coast of Nigeria within this zone and it is subject to universally recognized rights of other States (including land-locked States). The effect is- that Nigeria has the right in relation to conservation or exploitation of natural resources especially minerals, living species and so on and so forth on the sea bed, its subsoil and superjacent waters and the right to regulate by law the establishment of artificial structures and installations and marine scientific research, among other things. It is worthy to note, that EEZ is measured as an area extending from the external limits of the territorial waters of Nigeria upto a distance of 200 nautical miles from the baseline from which the breadth of the territorial waters of Nigeria is measured. A times agreements are made between neighbouring States on EEZ as provided in section 1 (2) as follows: The provisions of subsection (1) of this section shall not be applicable to the extent that under the provisions of any treaty or other written agreement between Nigeria and any neighbouring territorial state, the EEZ is agreed to be less than the distance specified in subsection (1) of this section. The power to explore and exploit natural resources in the EEZ vests on the Federal Government or her Agency. 2.1.6 Oil in Navigable Waters Act 80 This is one of the most important Act stemming from the International Convention for the Prevention of Pollution of the Sea by Oil 81 . It is
77 By section 18 (1) of the interpretation Act Cap 123 LFN, 2004. 78 By the UNCLOS of 1982. 79 It commenced on 2nd October, 1978. 80 Came into force on 22nd April 1968. 81 In 1954 to 1962, aimed at protecting navigable waters of Nigeria.
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specifically referable to oil products.OTk his Act relates to purposeful discharge of oil into water as well as spillage by the provisions as hereunder stated: Subsection (1) if any oil to which this section applies is discharged form a Nigerian ship into a part of the sea which in relation to t that ship, is a prohibited sea area, or if any mixture containing not less than 100 parts of oil to which this section applies... the owner or master of the ship shall subject to the provisions of this Act be guilty of an offence under the section. Yet subsection (2) provides that the section applies to: (a) Crude oil, fuel and lubricating oil and (b) Heavy diesel oil or (c) Any other description of oil.... It is worthy to note the provisions of section 3 subsection 1 on the categorization of discharge of oil into Nigeria waters thus: (a) If any oil or mixture containing oil is discharged into waters...... from any vessels, or from any place on land or from any apparatus used for transferring oil from or to any vessel (whether to or from a place on land: (b) If the discharge is from a vessel, the owner or master of the vessel ,or (c) If the discharge is from a place on land, the occupier of the place, or (d) If the discharge is from apparatus used for transferring oil fro or to a vessel the person in charge of the apparatus is guilty of an offence under this section,82 (e) Curiously the above Act provided a defence to the Oil industry offenders in section 4 viz: subsection (2) where a person is charged as mentioned in subsection (1) it shall be defence.....
82 In subsection (2), it was made clear that the section refers to whole of the sea within the seaward limits of the territorial waters of Nigeria and all other waters (including inland waters) which are within those limits and are navigable by sea-going ships.
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(i) That the oil or mixture escaped iOnkconsequence of damage to the vessel, and that as soon as possible or practicable, all reasonable steps were taken for preventing or for stopping or reducing the escape of oil or mixture. (ii)That the oil or mixture escaped by reason of leakage care and that as soon as practicable reasonable steps were taken for stopping or reducing its. 2.1.7 Oil Pipelines Act 83 It relates to capacity of the Federal Government through her representative(s) or agent(s) to grant licences to applicants who desire to carryout business in the Oil and Gas industry particularly in exploring for oil in the oil fields, mining oil. Usually in Nigeria, it is the Minister for petroleum, is empowered by law to grant such licences on behalf of the Federal Government to any applicant for survey routes for oil pipelines, construct, maintain and operate oil pipelines. It is trite that the licences are specific to the extent that each licence shall be issued in respect of and authorize the construction, maintenance and operation of one pipeline only84 connected with petroleum operations and trade. 85 The application is upon the payment of appropriate fees86 when a licence is issued to permit an applicant to survey, it becomes effective for the person to: (a) Survey and take levels of the land; (b) Dig and bore into the soil and subsoil. (c) Cut and remove such trees and other vegetation as may impede the purpose specified in this sub-section; and (d) Do all other acts necessary to ascertain the suitability of the land for the establishment of an oil pipeline or ancillary installations. However the survey route may be altered by government. 87 However, it is interesting that specification of the route of the oil pipeline passage gives
83 The Act came into force on 4th October, 1956. 84 By section 3(a)(b) of the Oil Pipelines Act, 1956. 85 Section 4 (1)(2), the Oil Pipelines Act, 1956. 86 Section 31 (1)(2)(3)(4)(5) of Oil Pipeline Act. 87 Sections 5(1) (a) (b) (c) and (2),Oil Pipeline Act.
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opportunity for the government via theOMk inister to give at least six weeks notice for anybody whose interest on land likely to be affected to raise objections88 where such object is proven on inquiry by government through her agents (Minister or appointed representative) the compensation is to be paid by the holder of the licence in accordance section 5 and the subsections as follows: (a) to any person whose land or interest in land (whether or not it is land in respect of which the licence has been granted) is injuriously affected by the licence, for any such injurious affection not otherwise made good; and (b) to any person suffering damage by reason of any neglect on the part of the holder or his agents, servants, or workman to protect, maintain or repair under the licence, for any such damage not otherwise made good; and (c) to any persons suffering damage (other than on account of his own default or on account of the malicious act of a third person) as a consequence of any breakage of or leakage from the pipeline or an ancillary installation, for any such damage not otherwise made good; where there is disagreement as to the quantum of compensation recourse will be hard to the Court and it shall fix the amount as stipulated in part iv of this Act.89 It is noteworthy, that any other person can apply to the Minister for permission to use the pipeline constructed maintained by the holder of a licence to convey oil products and the Minister will grant the application upon consultation with the owner of the pipeline. However, if the owner of the pipeline fails to comply, he will be guilty of an offence and will be liable or summary conviction to a fine from N1000.00 immediate will be 92 up to N50,000 per each day if failure to comply continues.
88 Sections 8 and 9,Oil Pipeline Act. 89 By sections 19, 20, 21, 22, on jurisdiction of a Magistrate Court seized of such amount for the compensation on only the jurisdiction shall not extent civil matters to Titled to land or any interest to any land. Otherwise by a High Court of a State whether as an original trial or appeal thereto. The compensation is basically for damages he is building, crops or neglect on the part of the holder of licence to protect, maintain or repair any structure or thing.
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One may ask, what is an oil pipelineO?kThe answer may be discovered in Nigeria AGIP Oil Company Ltd v. Kemmer 90 where the Court of Appeal held that: An oil pipeline means a pipeline for the conveyance of oil minerals, natural gas and any other derivatives or components also any substance (including steam and water) used or intended to be used in the production or refining or conveying of mineral oils, natural gas and any of their derivatives or components. 2.1.8 Environmental Impact Assessment Act (EIA)91 This Act is paramount to the extent that most activities in the oil and gas industry affect the environment one way of the other. Whereby there are visible development or negatively whereat there are obvious degradation of the land to the extent that the land may become barren and grow no food or pollution of the waters that will affect the marine habitant or pollution of the atmosphere by for example gas flaring that will prevent fresh air and in extreme pollution lead to acid rain when there is much sulphur in the atmosphere when mixed with carbon dioxide descends as rain containing acid which is very dangerous to health. The objectives of any environmental impact assessment are: (a) To establish before a decision is taken by any person, authority, corporate body or unincorporated body including the Government of the Federation, State or Local Government intending to understand or authorize the undertaking of any activity, those matters that may be likely or to a significant extent affect the environment or have an environmental effect on those activities and which shall be taken into account. (b) To promote the implementation of appropriate policy in all Federal lands, (however acquired) State and local Government Areas, consistent with all laws and decision making processes through the goal and objective in paragraph (a) of this section may be realized.
90 (2001)8 WLR (pt.716) 506 . 91 It came into force December 1992 and has since then guided activities that will affect the environment. It came as a result of the United Nation Convention of Environment after the conference in Rio de Janeiro, Brazil in 1992.
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(c) To encourage the development Ookf procedures for information exchange, notification and consultation between organization and persons when proposed activities are likely to have significant of bordering town and villages.92 Again, no sector of the economy, whether private or public, shall embark on any project notwithstanding its authorization without prior consideration, at an early stage, of their environmental effects. Explicitly stated, the minimum content of environmental impact assessment are to be carried out as follows: (a) A description of the propose activities; (b) A description of the potential environment, including specific information necessary to identify and assess the environmental effect of the proposed activities; (c) A description of the practical activities as appropriate; (d) An assessment of the likely or potential environmental impact of the proposed activity and the alternatives, including the direct or indirect cumulative, short-term and long-term effects. (e) An identification and description of measures available to mitigate adverse environmental impacts of proposed activity and assessment of those measures; (f) An indication of gaps in knowledge and uncertainty which may be encountered in computing the required information. (g) An indication of whether the environment of any other State of Local Government Area or areas outside Nigeria is likely to be affected by the proposed activity or its alternatives; and, (h) A brief and non-technical summary of the information provided under paragraphs (a) to (g) of this section.
92 Sections 1 (a) (b) (c) and 2, Environmental Impact Assessment Act,1992.
61 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 Before environmental impact assessmOkent is carried out, opportunity, stipulated duration and access, must be created for comments by person or persons (groups) that may likely be affected. Again, it is expected that the public and Exports will comment. Any decision of environmental impact assessment must be in writing as providing in section 9 of the Act and ought to also include the following: (a) The reason for the decision (b) The provisions, if any to prevent, reduce or instigate damage to the environment; (2) The report of the Agency shall be made available to any interested person or group; and, (3)... the report may be published to the public. 2.1.9 Harmful Waste (Special Criminal Provisions) Act93 The interesting thing about this Act is that most developing countries which Nigeria happens to be one, experience glaring dumping characteristics from developed countries. Interestingly the Act94 provides as follows: (a) Carries, deposits, dumps or causes to be carried, deposited or dumped or is in possession for the purpose of carrying, depositing or dumping any harmful waste on any land or in the territorial waters or contiguous zone or the Executive Economic zone (EEZ) of Nigeria or its inland water ways (b) Transport or causes to be transported or is in possession for the purpose of transporting any harmful wastes. (c) Imports or causes to be imported or negotiates for the purpose of importing any harmful wastes; and, (d) Sells, offers for sale, buys or otherwise deals in any harmful waste shall be guilty of a crime under this Act. 93 It came into force on 25th November, 1998. 94 Section 1 (2) (a) (b) (c) and (d), Harmful Waste (Special Criminal Provisions) Act,1998.
62 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 The imputation of dumping here remOiknds of the 1998 toxic waste saga whereby toxic waste was dumped in tonnes at Koko town in Delta State of Nigeria. A foreigner called Mr. Gianfranco Rafelli who was aided by some get-rich quick Nigerians approached a Koko landlord, Mr. Sunday Nana, and offered him a rent of five hundred naira a month to allow them the use of part of his compound to store some drums of chemicals imported into Nigeria through Koko port.95Immediate thereafter, some Nigerian students in Italy sent a distress call to Nigeria and stated that the chemicals from Italy were toxic. A Nigerian nuclear Scientist96 who became special assistant to the Minister of science and technology confirmed that the Koko waste was toxic. A scholar Steve Azaiki wrote that the act brought a serious rift between the Nigerian and Italian Governments to the extent that the Italian government brought in a vessel MV Marol S. Haren that shipped the drums out of Nigeria back to Italy. Thereafter, the site were the drums were packed was excavated to a depth of 60 centimeters and the burrow pit was refilled with approved soil from an approved site. The weight of the perceived harm will be estimated with the subsequent events that followed as the Federal Government of Nigeria set up a panel to measure the level of radio activity of the substance in Koko. Though, the panel made a report that nothing significant with regards to any radioactive element remaining without the area. Interestingly, the International Atomic Energy Agency after research dismissed any long term danger in Koko. Yet, the Nigerian government spent about fifteen Million Naira (N15,000.000) to clean up the area. Subsequently, Mr. Nana died which raised fear amongst the people. 2.1.10 West African Gas Pipelines Project (Special Provisions Etc) Act97 95 The offer was attractive and Mr. Sunday Nana accepted. Thereafter 8000 drums of toxic water containing 35000 tones of deadly chemicals of policy. 96 Professor B. N. C. Agu who worked as a Director of Nuclear safeguards at the International Atomic Emery Agency in Vienna. 97 It came into force on 22nd day of June, 2005.
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By this Act, Nigeria as a State Party tOoka Treaty (the West African Gas Pipelines Project) has domesticated the said treaty in accordance with section 12 (i) of the Constitution of the Federal Republic of (CFRN) Nigeria, 1999. Therefore, treaty has become part of the municipal Laws of Nigeria thereby applicable in Nigeria. The treaty is an international agreement involving many countries with an absolute aim to ensure smooth harnessing and distribution of natural gas across borders without any let or hindrance. The treaty aims at providing easement in piping as across many countries in the sub-region. The Act provides that there is no need for the establishment of a legal presence in Nigeria but that it shall be exempted by the Corporate Affairs Commission (CAC) from any requirement in the Companies and Allied Matters Act (CAMA) 1990 to incorporate as a separate local legal entity rather that the CAC shall maintain limited registration for the West African Gas Pipelines Company Limited, 98 a company which is a fall out of the Treaty and the Company shall be an external company. It is curious that this company is not required by law to comply with reporting and filling requirements under any law or enactment other than the following reporting requirements of passing information to the commission only on issues of change of its particulars and audited financial reports within six months of the end of each tax year.99 Very interesting is the content of section 4 of this Act which provides as follows: Notwithstanding anything to the contrary contained in any enactment or law, there shall be no restriction on the ownership of any transfer of or any transaction concerning, shares in or the share capital of the company and any solve, transfer, pledge of or other transaction in the share capital of the company or the share capital of a shareholder shall not be subject to any prior approval of any authority in Nigeria nor shall it give to any right to
98 A company formed pursuant to Article Vii of the WAGP Treaty of 28th May, 2003. 99 Section 2(3) of the WAGP Act, 2004
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suspend or evoke a project authorOizkation or a project right nor to amend the terms or conditions thereof.100 Still, the Government shall have the power to take all measures required of it under the WAGP Treaty or the International Project Agreement, or which it considers necessary, to provide funds and support the activities of the WAGP Authority as the need arises.101 It is obvious that the Nigerian State cannot question the operations of the WAGP company but is expected to fund it. The worrisome aspect is that if there is any wrong doing on the part of the company, the state cannot do much based on the International agreement. The question is, does such an agreement protect the interest of the citizens of Nigeria? The answer is more in the negative than positive. However, the only time, the Nigerian Government is empowered to place any restriction on WAGP Company, is during any national emergency declared by the president in accordance with the Nigerian Constitution. Thus, the government can stop the transmission of natural gas through Nigeria or across its territorial boundaries and whenever the state of emergency is over such restrictions shall cease.102 2.1.11 The Energy Commission Act103 The Commission is basically charged with monitoring of all sectors of energy in Nigeria. Its membership cuts across many ministries with the Ministers of Ministries such as: Petroleum Resources, Science and Technology, Power and Steel, Defence, water resources, finance, external affairs, defence and Agriculture and Rural Development charge with the responsibility of energy planning and analysis conservation and renewable. Energy sources and so on and so forth. The Commission shall establish Technical Advisory Committee chaired by the Director
100 Section 2 (4) (a) (b) (c) of the WAGP Act, 2004. 101 Section 8 of the WAGP Act, 2004. 102 Section 9 of the WAGP Act, 2004. 103 The Act Commenced on April, 30, 2003. See section 19 of this Act.
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General of the Commission which shallOckomprise of membership of representatives drawn from several ministries and government Agencies or professional organization as follows: (a) The Petroleum resources (b) Power and steel (c) Science and technology (d) Agriculture and rural development (e) Water resources (f) Finance (g) Defence (h) Industries (i) Education (j) Communication (k) Environment (l) Solar Energy Society of Nigeria (m) Nigerian Mining and Geosciences Society (n) Centre for Energy Research and Development at the: Ahmadu Bello University, Zaria Obafemi Awolowo University, Ile-Ife, Usman Danfodio University, Sokoto, University of Nigeria, Nsukka and any new energy centre that may be established from time to time. (o) Nigerian Society of Engineers (p) Nigerian Mining Corporation (q) Nigerian Coal Corporation (r) National Electric Power Authority (s) Nigerian National Petroleum Corporation.104 The Committee is empowered to co-opt any suitable Nigerian as and when necessary105 from the core Oil and Gas producing States that was included in the
104 Section 3 (i) (2) of The Energy Commission Act
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membership of centres for research andODkevelopment anchored within universities as provided in the Energy Act. That must be a strange oversight for if there is any where or thing that ought to be indicated in that Act it must be places within the Core Niger Delta. How can it be explained that with reference to States and ones no if the South-Sought States or Zone was listed. The researcher maintains that, it calls for urgent redress. The duties of the Energy Commission are as follows to: (a) Serve as centre for gathering and dissemination of information relating to national policy in the field of energy development. (b) Serve as a centre for solving any inter-related technical problems that may arise in the implementation of any policy relating to the field of energy. (c) Advise the Government of the Federation on a State on questions relating to such aspects of energy as the government of the Federation or State may from time to time refer to it. (d) Prepare, after constitution with the agencies of government whose functions relate to the field of energy development or supply as the Commission considers appropriate, periodic master plans for the balanced and coordinated development of energy in Nigeria and such plans shall include:(i) Recommendations for the exploitation of new sources of energy development or supply as the Commission considers appropriate, period master plans for the balanced and co-ordinated development of energy in Nigeria and such plans shall include:(ii) Such other commendations to the Government of the Federation relating to its functions under this Act as the Commission may consider to be in the national interest. (e) Lay down guidelines on the utilization of energy types for specific purposes and in prescribed sequence.
105 Section 3 (3) of The Energy Commission Act.
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(f) inquire into and advise the GovernOmkent of the Federation or of the State on the adequate funding of the energy sector including research and development production and distribution: (1988 No. 32). (g) Collate, analyzed and publish information relating to the field of energy from all sources, where such information is relevant to the discharge of its functions under this Act. (h) Monitor the performance of the energy sector in the execution of government policies on energy. (i) Liaise with all international organizations in energy matters such as the International Atomic Energy Agency, World Energy Conference and other similar organizations; (j) Promise training and manpower development in the energy sector and (k) Carry out such other activities as are conducive to the discharge of its functions under this Act. Instructive that the Commission must act under the permission of the Presidency as any act carried out without such mandate is non-implementable. 2.1.12 Petroleum (Special) Trust Fund 106 The fund guides the management monies that may accrue from petroleum sales. The management includes receiving such monies and expending them especially disbursing to the Federation account, the NNPC and other beneficiaries as may be determined by the President of the Federation of Nigeria. Thereafter the remaining amount of money is retained by the Trust Fund Management Board.107 The interesting functions of the management of the Trust Fund are the facts that the balance of the funds are to be used in developmental projects in areas of education, health, food supply, water supply, security services and to any other needy sector as may be approved from time to time. Yet it is expected that there
106 No. 25 of 4th October, 1993 establishing a Trust Fund into which shall be paid all monies; accruing from the sale of Petroleum products which will provide for the identification, funding and execution of projects to various sectors. 107 Section 3 (1) a (b) and (c), Petroleum (Special) Trust Fund Act,1993.
68 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 will be proper accountability just at the Management Board is expected by law to Ok exercise supervisory authority over the Trust Fund Project Implementation Task Force108 of the lofty dreams set out in his Act. It is so analyzed for the obvious facts that ideal educational policy and execution remain elusive in the Nigerian State at all levels. The current universal Basic Education is nothing to write home about not has a noticeable stride been achieved. In the area of health, a lot more is still left undone. Moreso with the advent of Human Immuno-Deficiency Virus and Acquired Immune Deficiency Syndrome (HIV/AIDs) disease that is ravaging the citizens of Nigeria which is currently put at about five percent 5%. Still portable or clean and adequate water supply is a luxury rather than a necessity. Even when food supply is in great shortage and hunger is truncating the land. Addressing adequate food supply is a matter of urgency. There is no gainsaying the fact that there is glaring insecurity all over the country with practical restiveness particularly among the youths of the country whether in the form of exhibitions of: Boko-Haram based in Bornu, Militants of the Niger Delta who really terrorized the Nigeria State until recently when the Amnesty programme was initiated and training scheme designed to better the lots of youths especially those from Niger Delta region. Not to be left out are the issues of kidnapping of Nigerians and Non-Nigerians, armed robbery incidents, road traffic accident which claims many lives, human trafficking which has assumed unimaginable dimension. All these portray and emphasis great insecurity in the nation and calls for urgent and immediate address by such government agency such as envisaged under this Act. 2.1.13 The National Oil Spill Detection and Response Agency (Establishment) Act109 108 Section 3 (1) (d) (c) and (h) , Petroleum (Special) Trust Fund Act,1993. 109 It came into force on 18th October, 2016, amended at the establishment of a national Agency to deal with Oil spillage.
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It established an agency that will be qOukick to detect and address oil spillage in Nigeria that will be run by a governing Board that will have a chairman and membership of representatives of the cards of Director from Federal Ministries such as: (i) Environment, (ii) Defence, (iii) Petroleum Resources, (iv) Transport, (v) Aviation (Department) of Meteorology, (vi) Communication, (vii) Works, (viii) Information and National Orientation, (ix) Housing and Urban Development, (x) The Nigeria Police Force, (xi) On products Trade section of Lagos Chamber of Commerce (OPTS), (xii) Agriculture and Rural Development, (xiii) National Emergency Management Agency (NEMA), and (xiv) Institute of Oceanography and Marine Research.110 The importance of this Act can never be over-emphasized for the reason that oil spillage is a very serious event which the agency is foist with the responsibility of addressing Oil spillage whenever it occurs. The effect of Oil spillage is better imagined as it destroys wherever and whatever it touches like the marine lives and activities the vegetation on the land as well as the soil fertility. Therefore, of necessity it is paramount that members of the agency must understand the enormous responsibility trust on them and for all times, in order to avoid being taken unaware and to avoid delays which can only be very dangerous
110 Section 2 (2) (a) (b)(i) ­ (xiv), The National Oil Spill Detection and Response Agency (Establishment) Act.
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to the safety of lives and property of thOekState and individuals, including protection of the environment. However, at the occurrence of disastrous spillage111 the agency must ensure that sufficient mobilization is done to clean up the environmental 112 by engaging available facilities and resources (like the International connections and the clean Nigeria Association (CNA) as well as sufficient funding technical support, training research and development.113 The agency is expected to establish agreements with neighbouring countries for co-operation in the event of spillage so as to ensure rapid response to spillage. By Section (6 (2) of the Act an Oil spiller that is the person involved with the cause of the oil spillage is required to report an Oil spill to the Agency in writing not later than twenty-four (24) hours after the occurrence of an oil spill, where the person defaults and fails to report, hear she will attract a penalty in the sum of five hundred thousand naira (N5000,000.00) for each day of failure to report the occurrence. Again failure of the oil spiller to clean up the oil spill from the impacted site, to an all practical extent including remediation shall attract further fine of one million naira(N1m)114question is will such an amount cure the damage? The answer will definitely be in negative. 2.1.14 Petroleum Production and Distribution (Anti-Sabotage) Act115 There is no doubt that sabotage of any form leaves devastating effects on both the government and the citizenry. Thus it is regarded as an offence readily frowned at and appropriately punished. What constitutes the offence is as provided to not:
111 Section 5 (a) , The National Oil Spill Detection and Response Agency (Establishment) Act 112 Section 5 (a) ,The National Oil Spill Detection and Response Agency (Establishment) Act. 113 Section 5 (e) (h) and (i) The International Organization is expected to be engaged in research and exchange of results of research and development programmes including surveillance, containment recovery, disposal and clean up best practices. 114 Section 6 (3) ,The National Oil Spill Detection and Response Agency (Establishment) Act. 115 It came into force on 7th November 1975.
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(1)
Any person who does any oOfkthe following things:
(a) Willfully does anything with intent to obstruct or prevent the
production or distribution of petroleum product in any part of Nigeria, or
(b) Willfully does anything with intent to obstruct or prevent the
procurement of petroleum products for distribution in any part of Nigeria, or
(c) Willfully does anything in respect of any vehicle or any public highway for the distribution of petroleum products116 shall if by doing that thin
he (she) to any significant extent causes or contributes to any interruption in
any of Nigeria is guilty of the offence of sabotage under this Act.
Recently for any act of sabotage, the offender, on conviction, is liable to be
sentenced to a term of imprisonment not exceeding 21 years.
It is then obvious that the Militants and pipelines tamperers as well as those who
hard petroleum products, for example, fuel, kerosene are due to be tried as
saboteurs. Interestingly, the interpretation of willfully which ran across the three sub-provisions may need reference to the interpretation Act117what happens when
such act, for example obstruction is in interpreted to mean self defense of the
environment that have been pollute particularly in the Niger Delta areas without
any form of compensation. There is need to distinguish between protective
obstruction and any other obstruction. In Ayorinde v. Oyo State Government 118 the court of Appeal held that laws of Nigeria do not permit
deprivation of an individual of his/her vested rights.
2.1.15 The Nigerian LNG (Fiscal Incentives, Guarantees and Assurance) Act119
This Act aims at guaranteeing concessions with regards to taxes customs and
other levies in view of the magnitude of and in consideration of the investment
116 Section 1 (a) (b) and (c), Petroleum Production and Distribution (Anti-Sabotage) Act, 1975 . 117 Cap 123, LFN, 2004. 118 (2007) All FWLR 709. 119 It came into force in 1990, and was amended in 1993. Amend exempting the Nig. LNG from certain taxes customs, Duties and other levies.
72 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 which shall have to be made in order to prosecute the venture described in the Ok shareholders any contract. In Niger Delta Development Commission v. Nigeria Liquefied Natural Gas Ltd120 the issue was whether or not Nigeria LND Ltd is statutorily obliged to pay three percent (3%) of its total annual budget to the Niger Delta Development Commission (NDDC). It is the case of the NDDC that the Nig LNG as the Defendant and being a gas processing company operating in the Niger Delta area of Nigeria within the meaning and intendment of S.14 (b) of the NNDC Act 2001 is obliged to pay 3% of the total annual budget for the year 2001 to 2004 and in every year thereafter to NNDC. It must be noted that the Nig. LNG Act of 1990 as amended in 1993 exempts the Nig LNG from certain taxes, customs duties and other levies. The court held that since both parties are products of special Acts that gave rise to conflicting provisions on rights of special interest and in that situation, the principle that the latter law in time by implication repeals the earlier law is not applicable. Thus the NNDC Act though later in time (2001) cannot apply to the Nig. LNG which is covered by a 1993 Act as amended. Moreso, as the Nig. LNG Act was made in agreement with the NDDC and the Federal Government of Nigeria as contained in the preamble of the Nig. LNG Act. Moreover, the court opined that the NDDC Act is not a General Act but an Act intended to take care of the people of Niger Delta especially on ecological problems arising from exploration of Oil and not intended to repeal the Nig. LNG Act. Furthermore, schedule 11 of paragraph 3 of the Nigeria LNG Fiscal Incentive Assurance and Guarantees) Act provides thus: without prejudice to any other provision contained herein neither the company nor its shareholders in their capacity as shareholders in the company shall in any way be subject to new laws regulations, taxes, duties, import charges of whatever nature which are not applicable generally to 120 An unreported Federal High Court of Port-Harcourt Matter suit No. FHC/PH/CS/313/2915, a judgment of Hon. Justice R.O. Nwodo now JCA.
73 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 companies in Nigeria or to shareholder in companies incorporated in Ok Nigeria respectively. This is more of protection of the companies doing business in Nigeria than protecting of Nigerians. It is noteworthy that international best practices expect equal protection of the inhabitants where oil is prospected exploited and produced especially with reference to prevention of environmental solution. 2.1.16 Coastal and Inland Shipping (Sabotage) Act 121 This act is important to the businesses that are carried out in the Oil and Gas, industry in Nigeria especially with regards to transportation of Oil using vessels via Nigerian waters. The transportation may be within or outside the country. The provision of the Act emphasized the relationship between the Oil industry and carriage (transportation) on Nigeria waters. To illustrate the connecting, the Act provides in section 2 subsection (c) as follows: The carriage of passengers by vessel from any place in Nigeria to any place above or under Nigerian waters to any place in Nigeria, or from any place above Nigeria waters to the same place or to any other place above or under Nigerian water where the carriage of the passengers is in relation to the exploration mineral or non-living natural resources in or under Nigerian waters. A vessel, tug or barge of whatever type other than a vessel, tug and barge whose beneficial ownership resides wholly in a Nigerian citizen shall not engage in the carriage of materials or supply services to and from Oil rigs, platform and installations or the carriage of petroleum products between oil rigs, platform and installation whether offshore or onshore or within any ports or points in Nigeria waters.122 121 That came into force on 30th April, 2003 as Act No. 5. 122 Section 5 of the Act. Nigeria Waters includes inland waters territorial waters or waters of the EEZ respectively, together or any combination thereof.
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It is also very instructive that any veOsksel to be used in oil business ought to be registered and the vessels that are provided for as specified hereunder. (a) Passenger vessels, (b) Crew boats , (c) Bunkering vessels, (d) Fishing trawlers, (e) Bargers, (f) Offshore service vessels, (g) Tugs, (h) Anchor handling tugs and supply vessels, (i) Floating petroleum storage, (j) Dredgers, (k) Tankers....123 By provisions of subsection (s) (i) and (k) it is obvious that oil and gas business are envisaged to utilize the sabotage shipping services. What is paramount related to the fact that in the process of carrying oil there may be pollution of the waters where there may be pollution of the waters where there is leakage from the vessel or occurrence of accident. It is necessary to instruct or acquaint anybody responsible for the spill or the mode of remedying the situation in accordance with the appropriate laws such remedies ought to take care of any Nigerian citizen that may be affected and/or the impacted site within the affected environment. 2.1.17 Niger Delta Development Commission (NDDC) (Establishment, Etc) Act 124
123 Section 22 (5) (a) ­ (m) of the Sabotage Act No. 5 of 2003 aimed at restriction of the use of foreign vessels in domestic coastal trade to promote the development of indigenous tonnage. It is supported by the National Inland waters Act of 1997. 124 No. 6 it established the NDDC by its section and came into force on 12th July, 2000 as an Act which repealed the Oil Mineral Producing Area Commission Act, 1988. It established a new Commission (the NDDC) with a reorganize management and administrative structure for more effective; and for the use of the sum received from the
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Niger Delta region of Nigeria is locOatked in the Southern part of Nigeria. It was initial confirmed to the geo-political area occupied by minorities other Southern Nigeria made up of six (6) state of Akwa-Ibom, Bayelsa, Cross River, Delta, Edo and Rivers. Now there are nine (9) oil producing States. The additional three (3) States are Abia, Imo and Ondo States. The Nigeria Delta area of Nigeria is one of the largest or most extensive delt as in the worlds and covers an area of about 70,000 square kilometers and has a difficult terrain. To illustrate the further it includes: sandy coastal ridge barriers high susceptibility of the coastal line to tidal waves of the Atlantic Ocean mangroves, heavy rainfall forests125. Interestingly, the Niger Delta region regarded as the supplier of Nigerias lifeblood has its inhabitants left in severe life-threatening ecological hazards (environmental problems) and human rights deprivation due to oil exploration, exploration and production inclusive of other Oil Mining activities associated with the Oil and Gas Industry in Nigeria. Policies and programmes by different regimes in Nigerian have been entrenched to create enabling environment in Niger Delta region to no avail. During the President Shehu Shargari regime there was created the Presidential Task Force which devoted 1.5% of the Federation ­ Account to the development of the Niger Delta Region. Belgore Commission as a result of the restiveness of the people within the Niger Delta region. Later, the Oil Mineral Producing Area Development Commission (OMPADEC) came into existence in 1998 by Decree No. 41 which is new replace by the NDDC which came into existence by the NDDC Act of 2000.126 Olusegun Obasanjo who at the foundation of the commission out of conviction stated thus, "I believe in...
allocation of the Federation Account for tackling economic problems arising from the exploration of oil in the Niger Delta area. 125 Y. George ­ Akinseye, Niger Delta Development Commission (NDDC) Act, Human Rights Dimensions, 2013, p. 116. 126 It is generally believed that the OMPADEC was under funded which led to failure to achieve the objective of the formation of the commission. Again, the failure was posited to flow from official climate and great injustices meted to the people of the Niger Delta region.
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the potential of the NDDC to offer Oak lasting solution to the socio-economic difficulties of the Niger Delta".127 The NDDC is a body corporate with its headquarters in Port Harcourt, River State of Nigeria.128 The areas referred to are states within the oil producing area in Nigeria which comprises: Abia State, Akwa -Ibom State, Beyelsa State, Cross River State, Delta State, Edo State, Imo State, Ondo State, and Rivers State. It is worthy of note to observe that the commission must have in its memberships one representative from each state, three persons representing the non-oil producing state and one person representing the oil producing companies as well as one representative from the Ministries of Finance and environment129. The cardinal work of the NDDC is to formulate policy guideline and for the development of the Niger-Delta area as well as tackle ecological and environmental problems that result from the prospecting exploration and production of oil and gas, particularly on the prevention and control of oil spillages, gas flaring and environmental pollution. It is expected that such protective and control measures will create the enabling environmental pollution. It is expected that such protective and control measures will create the enabling environment that will encourage sustainable development in field industrialization of transportation, health, education employment, portable water, electricity only in the Nigeria Delta area by the whole of the Nigeria State.130 2.1.18 Allocation of Revenue (Abolition of Dichotomy in the Application of the Principle of Derivation) Act 131 It targeted addressing the issue of the principle of Derivation based on the critical issue of onshore and offshore resource exploitation and production of Oil or gas in Nigeria.
127 Quoted in the Comet News Paper of Monday, November, 2001, p. 36. 128 Section 1 (2) (3) ,Niger Delta Development Commission (NDDC) (Establishment, Etc) Act. 129 Section 2 (b)(i) ­ (ix), (c) (d) (f) and the Chairmanship of the Commission must rotate amongst the named states. 130 Section 7, subsection (1) (a) (b) (h) (i) and (j), Niger Delta Development Commission (NDDC) (Establishment, Etc) Act. 131An Enactment of the National Assembly of Nigeria that came into force on 16th February, 2004.
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Before this Act came into force, whOekre Oil yielding revenue to the Nigerian State was on the basis onshore which relates to upland drilling and offshore which relates to deep water drilling.132 Thus at the commencement of this law the two hundred metres water depth isobaths contiguous to a state of the Federation is deemed part of a state for the purpose of computing the accruable to the Federation Account from the any state of reference in the Federation of Nigeria. In AG Federation v. AG Abia No. 2133on whether Oil and Gas resources derivable from Nigerias Territorial water, continental Shelf and Exclusive Economic Zone are part of a littoral State in Nigeria. The Supreme Court of Nigeria held that since the Southern boundary of each littoral State in the Federal Republic is the low-water mark, all the littoral States including Akwa-Ibom, are not entitled to a share in the revenue accruing to the Federation Account where littoral State means. That judgment was based on the fact that the Federal Government is the absolute controller of all natural resources not withstanding from where it is derived in accordance with section 44(3) of the Constitution of the Federal Republic of Nigeria, 1999, (As Amended). However, that judgment led to the entrenchment of this Act abolishing dichotomy in the derivation principles of sharing revenue in Nigeria. 2.1.19 Nigeria Extractive Industry Transparency Initiative (NEITI) Act, 2007 The Act established a body to be known as the Nigeria Extractive Industry Transparency Initiative, "NEITI" and provide that the NEITI shall be an autonomous self accounting body, which shall report to the President, and that it may acquire, hold and dispose of real and personal property.
132 Before this enactment there were great dichotomy as to whether the natural resources were tapped onshore or offshore. 133 (2002) 6 NWLR (pt. 764) 542.
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The primary objectives of the NEITIOkare: (a) To ensure due process and transparency in the payments made by extractive industry companies to the Federal Government and its Agencies; (b) To ensure accountability in the revenue receipts of the Federal Government from extractive industry companies; (c) To eliminate all forms of corrupt practice in the determination, payment, receipt and posting of revenue accruing to the Federal Government from extractive industry companies. Section 3 of the Act provides as follows: For the purpose of realizing its objectives under this Act, the NEITI shall perform the following functions: (a) To develop a framework for transparency in the reporting and discourse by extractive industry, companies of revenue due to or paid to the Federal Government and its Agencies. (b) To evaluate the practices of extractive industry companies regarding acquisition of acreages, budgeting, contracting, materials procurement and production cost profile in order to or paid to the Federal Government; (c) To ensure transparency in the management of the investments of the Federal Government in extractive industry. (d) To request, as may be deemed necessary, from any company in the extractive industry an accurate record of the cost of production and volume of sale of oil, gas or other minerals extracted by the company at any period. (e) To request from any company in the extractive industry, or from any relevant origin of the Federal, State or Local Government an accurate account of money paid by and receive from the company at any period, as revenue accruing to the Federal Government from such company for that period;
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(f) To ensure that all payments due toOkthe Federal Government from extractive industry companies, including taxes, royalties dividend, bonuses, penalties, levies and such like, are duly made; (g) To identify weaknesses and undertake measures that will enhance the capacity of any relevant organ of the Federal, State or Local Government having responsibility to Monitor revenue payment by extractive industry companies to the Federal Government; (h) To disseminate by way of publication of records, reports or otherwise, any information concerning the revenue of the Federal Government from extractive industry companies, as it may consider necessary. (i) The NEITI shall in each financial year appoint an independent auditor for the purpose of auditing the total revenue which accrued to the Federal Government for that year from extractive industry companies, in order to determine the accuracy of payments and receipts. (j) Sub-section of the Act provides that the independent auditor appointed under Subsection (1) shall be engaged on such terms and conditions as the governing body of the NEITI may approve.(k) Sub-section of the Act provides that upon the completion of an Audit Report, the independent auditor shall submit the report to the NEITI, which shall cause same to be published for the information of the general public. The functions of NSWG are set out in Section 5, sub-section (1), (2) and (3) which include: formulation of policies, programmes and strategies for the effective implementation of the objective and the discharge of the functions of the NEITI and approval of the annual budget and work-plan of the NEITI, as well as ensure the periodic review of programme performance by the NEITI. 2.1.20 The Nigerian Oil and Gas Industry Content Development Act, 2010
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This legislation, the subject matter ofOtkhis research, is perhaps the last principal legislation in the Nigerian Oil and Gas Industry. It came into force in 2010. The details of the Act shall be the focus of chapter three of this work. It should be noted that the Petroleum Industry Bill is currently pending before the National Assembly for passage into Law.
2.2 Analysis of Subsidiary Legislations in Nigeria's Oil and Gas Sector Some of the Regulations, Rules and Orders affecting Oil and Gas operations in Nigeria will also be analyzed in this research, as they tend to be more explicit and regulate the day to day activities of the oil and gas industry in Nigeria. These laws fall within the purview of what is referred to as the Petroleum Regulations made pursuant to powers conferred by section 9 (1) of the Petroleum Act which apply to the whole of the Federation. Section 9 which refer to various aspects of the problems confronting the Oil and Gas industry in Nigeria. Generally, there are precautions that must be uppermost in the minds of anybody in the oil and gas business bearing the fact that he/she must operate within the legal framework provided by the Nigerian nation nor within province of international best practices such as seeking and obtaining the appropriate licence for any activity or activities as may be desired. The different activities and expectation will be further analyzed subsequently by addressing the subsidiary legislation provisions. 2.2.1 Oil Prospecting Regulation The grant of an Oil Prospecting Licence (OPL) confers on the grantee the exclusive right to explore and prospect for petroleum within the area of his licence.134 The OPL may have a duration of up to 5 years under the Petroleum Act (1969) as amended. More importantly, the holder of an oil prospecting licence may carry away and dispose of petroleum won during prospecting operations, subject to the fulfillment 134 Section 5 of the First Schedule Section 2 (3) , Petroleum Act 1969.
81 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 of obligations imposed upon him by or under the Petroleum Act, or by the Ok Petroleum profits Tax Act or any other Law imposing taxation in respect of petroleum. It is important to further espouse the rights and powers exercisable by the holder of Oil Prospecting Licence(s). The person shall have the rights and powers to: (a) Cut down and clear timber and undergrowth, (b) Make roads, (c) Appropriate water and use water founding the relevant area and to collect and impound the same.....135 However, it must be observed that in utilizing the above rights, the licence shall not deprive any lands, villages, houses or watering places for cattle of a reasonable supply or interfere with any rights of water enjoyed by any person under the Land Use Act of 1978 or any other enactments. It is worrisome how providing for cattle became of a primary important than human beings. It is hoped that this is not probably the reasons for not taking adequate and urgent care of the people of the Niger Delta area for so long which gave rise to militancy in the Region as experienced in Nigeria. Again reference to the Lan Ude Act and any other enactments creates ambiguity as to whom or what agency strictly speaking must be accounted to by the licences. It is trite that Land Use Act (LUA) vests all lands in the nation on the governor of each state of the federating States that make up the country called Nigeria.136 A scholar and jurist opined in his book137that: 135 Section 15 (1) (a) (b) (c) of the oil prospecting licence under the petroleum Act and Petroleum Drilling and Production Regulations 1969. 136 Of 28th March, 1978, in section 40, 46 (1) (a) and 47 vest all land in the Governors on trust for all Nigeria and that it gave the Governors powers to control and manage the land while the citizens merely have right to occupy the land. 137 A.A. Umezulike, The Land Use Act, more than Two Decades After and Problems of Adoptive Strategies of Implementation, Enugu, Sanaap Press Ltd, 2004, p. 118.
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All land reforms involve changes, wOhk ile drastic and reforms usually involve revolutionary change in ownership or control of land. Thus removing all the inequalities associated with land rights distribution in Nigeria. The Act vests all land within a State on the Governor of that particular State on trust except for parcels of land vested in the Federal Government and its agencies138. This Federal Government Power on land probably conforms with the rights ascribed in the Petroleum Act 1969 as well as the NNPC Act 1stApil, 1977. Ultimately it is for the Governors in the main to allocate land in the urban areas to individuals organizations and government Agencies. However in Abioye v. Yakubu 139 the Supreme Court held that the LUA did not strictosenso abolish existing rights before the statute came into force. In Salati v. Shehu140the Supreme Court per. Honourable Justice Uwais JSC (as he then was) now retired stated that unlike what obtained in the past, that is pre28th March, 1978 when the Land Use Act came into force, that all territory of each State became vested in the Governor who is to administer it for the use and common benefit of all Nigerians so as to abrogate absolute ownership of Land by individuals, families and communities. Thus LUA was intended to nationalized all parcels of land in Nigeria. Same was confirmed in Nkwocha v. Governor of Anambra State141. Yet the position in Abioye v. Yakubu Supra seems to be emphasized in the provisions under restrictions and further provisions that in the event of any dispute under sub-paragraph 7 (2) (3) of the Oil Prospecting Licences as to who is in lawful occupation or the owner of any land, or as to the amount of any compensation payable, the licencee or lessee shall deposit with the state authority such sum as shall appear to that authority to be reasonable satisfaction in full or in
138 O.V.C. Ikpeze, Gender Dynamics of Inheritance Rights in Nigeria, Need for Women Empowerment, Onitsha Nigeria Folmech Printing and Publishing Co. Ltd., 2009, p. 134. 139 (1991) 5 NWLR (pt. 190) 130. 140 (1986) 1 NWLR (pt. 7) 198. 141 (1984) 6. SC 262.
83 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 part of whatever compensation the licencee or lessee may be found liable to pay Ok without prejudice to the right of the licensee or lessee to recover any amount paid in excess of the said compensation. Again the regulations made reference to private land while private land means any land in respect of which a person is entitled to exercise a right of occupancy under the Land Use Act. 2.2.2 Marginal Fields Operations (Fiscal Regime) Regulations142 This has to do with fields that no longer produce much. Therefore, the marginal fields regulations calculated the percentages to be paid to government in accordance with the marginal fields to be paid to government in accordance with the marginal fields operation as follows: (a) For production below 5000 bpd, 2.5 percent; (b) For production between 5, 000bpd and 10,000bpd, 7.5 percent; (c) For production between 10,000bpd 25,000bpd, 1.8 percent; (d) For production between 15,000bpd 25,000bpd, 1.8 percent. Therefore, the paramount nature of this regulation relates to the fiscal regime to property rights and to calculate what is due to the government of the Federal Republic of Nigeria143 as the owners of the natural resources ought to utilize it for the best interest of the people of Nigeria. 2.2.3 Petroleum Drilling and Production Regulation144 It flows from the two previous regulations which are all tied under this broad law as the regulations that will guide processes in the Oil and Gas Industry. In respect of the sub-topic, concentration will be had to drilling rights. It is noteworthy that no person shall operate a drilling rig without a valid licence granted Minister and that such licence is not transferable.145 142 That came into force on 30th September, 2005. 143 Section 1,2 (1) (a) (b) (c) and (d), Marginal Fields Operations (Fiscal Regime) Regulations,2005. 144 Part of the Petroleum (Drilling and Production) Regulations of 1969, covering Oil exploration licence and Mining Leases. 145 Section 35 (1) (2) (b) (c), Petroleum (Drilling and Production) Regulations, 1969.
84 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 It is also very instructive that no existing well ought to be re-drilled, plugged or Ok abandoned.... Without a written of the Director of Petroleum Resources. Just as every borehole or existing well which the licencee or lessee intends to abandon shall unless, the Director of Petroleum Resources otherwise permits in writing, be securely plugged by the licensee or lessee so as to prevent ingress and egress of water into and from any portion or portions of the strata bored through and shall be dealt with in strict accordance with an abandonment programme.146 2.2.4 Oil Mining Lease An Oil Mining Lease may be granted only to the holder of an oil prospecting licence who has: (a) Satisfied all the conditions imposed on the License or otherwise imposed on him by this Act and discovered oil in commercial quantities147 Oil is deemed to have been discovered in commercial quantities by the holder of an oil prospecting licence, if the minister is satisfied that the licence is capable of producing at least 10,000 bpd of crude oil from the licenced area.148 The term of an Oil Mining Lease shall not exceed twenty years but may be renewed in accordance with the Act.149 There are significant investment opportunities in the Nigeria oil and gas industry. The focus is on downstream sector of the oil and gas industry where the Federal Government is determined to deregulate through the licencing of private refineries and removal of government subsidies to the sector and privatization of existing refineries. The domestic capacity will hopefully be able to meet at least, the local demand for petroleum products as the existing refineries have always produced below capacity caused by a host of factors, least of which is a poorly managed Turn Around Maintenance routine. 146 Section 36, Petroleum Drilling and Production Regulation 147 Section 7 of the First Schedule 2 (3) Petroleum Act of 1969. 148 Section 9 of the first schedule 2 (3), Petroleum Act of 1969. 149 Section 10 of the first scheduled 2 (3), Petroleum Act of 1969.
85 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 The Deregulation of the Downstream Oil and Gas sector (Petroleum Refining Ok and Marketing) has been in focus for some years now; scarcity of petroleum products and the gradual deregulation of petroleum product prices have generated much heated controversies. But the Government is determined to encourage private sector participation hence its licensing of private refineries and deregulation of product prices so as to improve local capacity. Therefore consolidation is expected in the industry with new entrants and so there are significant opportunities for both local and international investors. It has been reported that NNPC has directed that exploration and production companies should refine 50% of their production locally and NNPC itself is undergoing structural transformation to enable its position as an integrated Oil and gas company that is accountable are transparent. New opportunities exist for both upstream and downstream activities including exploration, production, pipelines and storage and for a large range of service companies including equipment supplies, technical service, consultancy, pipeline and storage contractors, banking and financing of development projects. The governments local content policy seeks more integrated local companies in Nigerias oil and gas sector. Nigeria may end a major exporter of Liquefied Natural Gas (LNG) despite having planned large scale gas consuming projects like gas fired power stations and opportunities for gas processing, distribution and pipeline abound.150 2.3 Conclusion In conclusion, the writer observed that there too numerous legislations, regulating the Oil and Gas sector of the Nations economy. These laws includes the principal enactments and subsidiary legislations. The researcher uncovered that the problem with the Nations Oil and Gas industry lies with implementation of the 150 www.marketresearch.com, last visited on 26 Oct.,2016.????
86 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 laws. It is therefore recommended that eOmk phasis should be focused on enforcement of the existing legislations rather than promulgation of new ones. The writer also proposes an amendment of the Nations 1999 constitution and the Land Use Act of 1978 to allow for resource control by oil producing states who shall in turn pay royalty to the Federal Government. This will end the problem of agitations, youth restiveness and oil pipeline vandalism by the people of Niger Delta region of Nigeria. Chapter 3 Analysis of the Nigerian Oil and Gas Industry Content Development Act, 2010 3.1 Introduction The introduction of appropriate legislative and administrative framework is the hallmark of national development strategy. The development plan may be general or sectoral, as in the case of the NOGICD Act which centres only on oil and gas
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sector of the Nations economy. The indOuk stry was until the commencement of the NOGICD Act 2010, controlled by IOCs and multinational corporations. This has not augured well for the economy and the standard of living of majority of Nigerians. The Act has as its cardinal objective, the stimulation of national development via regulation of the operators activities in the Nigerian oil and gas industry, which is the hub of the nations economy. The envisaged national development is expected to be realized through evolution of indigenous technology, job creation, utilization of local goods and services, local personnel and transfer of technology. The Act aims to achieve these laudable objectives through: i. Joint venture agreements between state agencies and foreign corporation with specific limits and stipulations in the scope of operations of the foreign companies; ii. Mandatory obligations placed on the foreign companies to utilize domestic goods and services (Quantitative Restriction, QR) iii. Statutory and institutional measures targeted at promoting the indigenous utilization of human and material resources.151 "Local Content" is defined in the Act as, "the quantum of composite value added to, or created in, the Nigerian economy by a systematic development of capacity and capabilities through the deliberate utilization of Nigerian human and material resources and services in the oil and gas industry".152 This chapter shall analyze the regulatory and institutional framework of the NOGICDA 2010 as follows
151 I. Michael, Local Content Act, Petroleum Industry Bill and National Development, a Conference Paper Delivered at the Nigerian Association of Law Teachers Annual Conference 2011, held at Rivers State University of Science and Technology, Port Harcourt, Nigeria between 18 ­ 21 July, 2011, p.2. 152 See section 106, the interpretation section of the NOGICDA 2010.
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3.2 Overall Policy Objectives and GenOkeral Obligation of the Act The general obligations imposed by the Act are found in sections 3, 7, 11, 53 and 41(2) of the Act. The mandatory general obligations are further developed and imposed on the operators and activities to be undertaken in the sector. Section 3 (1) of the Act provides as follows: "Nigerian independent operators shall be given first consideration in the award of oil blocs, oil field licenses, oil lifting licenses and all projects for which contract is to be awarded in the Nigerian oil and gas industry subject to the fulfillment of such conditions as may be specified by the minister". Section 3 (2) of the Act provides that "There shall be exclusive consideration to Nigerian indigenous service companies which demonstrates ownership of equipment, Nigerian personnel and capacity to execute such work to bid on land and swamp operating areas of the Nigerian oil and gas industry for contract and services contained in the schedule to this Act". The obligation imposed in the foregoing section accords preferential treatment to Nigerian operators and their goods and services in the oil and gas industry. Emphasis is placed on Nigerian human and material resources in every undertaking in the industry. This obligation nullifies or impairs Nigerias obligations under Article 2.1 (a) of WTO TRIMS, Article III.4 of GATT, XI of GATT 1994 and Article XVII.1 of GATS 1994.The details of how these provisions impair Nigerias WTO obligations shall be examined in chapter 5 of this dissertation. The Act defines Nigerian operator in section 106 as "Nigerian National Petroleum Company (NNPC), its subsidiaries and joint venture partners and any Nigerian, foreign or international oil and gas company operating in the Nigerian oil and gas industry under any petroleum arrangement". This definition is comprehensive enough to cover any local or foreign enterprise operating in the industry.
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Sub-section 3 of section 3 therein sOtikpulates that compliance with the Act and the promotion of Nigerian content development shall be a major criterion for award of licenses, permits and any other interest in bidding for oil exploration, production, transportation and development and any other operations in Nigerian oil and gas industry. The Act established the Nigerian Content Development Monitoring Board in its section 4 and charged it to promote a measurable and continuous growth of Nigerian content in all oil and gas arrangements, projects, operations, activities or transactions in the Nigerian oil and gas industry under section 5 of the Act. No license, permit or interest shall be granted to any operator to bid for any project in the industry except upon submission of Nigerian Content Plan to the Board, demonstrating compliance with the Nigerian content requirements of the Act.153 The said content plan shall contain the following information: a. That first consideration shall be given to services provided from within Nigeria and to goods manufactured in Nigeria; and (underlined emphasis supplied). b. Nigerians shall be given first consideration for training and employment in the work programme for which the plan was submitted.154 Again, this provision is a clear derogation of Nigerias WTO and FDI law obligations. According discriminatory treatment to goods and services from other countries in preference to made in Nigeria goods and services is a negation of national treatment obligation enshrined in Article III:4 and Article XVII of GATT and GATS 1994 respectively.
153 See section 7 of the NOGICDA 2010. 154 See section 10 (1) (a) and (b) of the NOGICDA 2010.
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3.3 Minimum and Specification of NiOgkerian Content The Act set out the minimum thresh hold of Nigerian content requirements for each project to be executed or goods and services to be supplied in the Nigerian oil and gas industry. The Nigerian content must be consistent with the level set out in the schedules to the Act. The Board is expected to set out Nigerian content requirement for any project description not covered by the schedule pending the amendment of the Act by the National Assembly. Where there is inadequate capacity for any of the targets set out in the schedule, the minister of petroleum resources may authorize the continued importation of such items, which shall not exceed 3 years from the commencement of the Act.155 All operators, alliance partners and contractors are compulsorily bound to comply with the content specifications in the schedule for particular project item, service or product set out in the schedule to the Act. (Italics supplied for emphasis). For purposes of lucidity, it is necessary to reproduce the schedule to the Act here for a better understanding of the analysis of the Act. Tables 1.1, to 1.10 below describes the Nigerian content levels, which, in the opinion of the writer, contravenes Nigerias WTO obligations, as well as international investment law obligations.
155 See generally section 11 (1) ­ (4) of the NOGICDA, 2010.
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Table 3.1 MATERIALOSkAND PROCUREMENT
Description of Products Steel plates, flat Seats, sections
Nigerian Content Measured Unit
(NC%)Unit
100%
Tonnage
Steel pipes
100%
Tonnage
Low Voltage Cables
90%
Length
High Voltage Cables
45%
Length
Valves
60%
Number
Drilling mud-Baryte, Bentonite
60%
Tonnage
Cement (Portland)
80%
Tonnage
Cement (Hydraulic)
60%
Tonnage
Heat Exchangers
50%
Number
Steel Ropes
60%
Tonnage
Protective paints
60%
Litres
Glass Reinforced Expoxy (GRE) pipes 60%
Tonnage
Source: Schedule to the NOGICD Act 2010.
Table 3.2 FABRICATION AND CONSTRUCTION
Description of Products Terminal/Oil Movement Systems
Nigerian Content Measured Unit
(NC%) Unit
80%
Volume
Drilling Molecules/packages
75%
Volume
Piles, Anchors, Buoys, jacket, Bridges, 80%
Tonnage
flare Booms, storage Tanks, pressure
vessels
Unblical
60%
Tonnage
Topside Module (process modules and 50%
Tonnage
storage modules)
Accommodation module
70%
Tonnage
Subsea System
70%
Tonnage
Pipeline systems
100%
T/Risers
Risers
100%
Tonnage
Utilities module/packages
100%
Tonnage
Source: Schedule to the NOGICD Act 2010.
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TABLE 3.3 FEED AND DETAILED ENGINEERING AND OTHER Ok ENGINEERING SERVICES
Description of Services
Nigerian
Measured Unit
Content (NC%)
Unit
FEED and Detailed engineering on shore 90%
Man-Hour
facilities
FEED and Detailed engineering on offshore 90%
Man-Hour
facilities shallow water
FEED and Detailed engineering on LNG 50%
Man-Hour
facilities
FEED and Detailed Engineering on Gas 90%
Man-Hour
gathering facilities
FEED and Detailed engineering on Deep 80% offshore facilities-Hull and topside modules
Man-Hour
FEED and Detailed engineering on Deep 80%
Man-Hour
Offshore floating concrete structure
Source: Schedule to the NOGICD Act 2010,
TABLE 3.4 FINANCE AND INSURANCE
Description of Services General Banking Service
Nigerian Content Measured Unit
(NC%) Unit
100%
Usage
Monetary Intermediation Services
70%
Usage
Credit Granting Services
50%
Loan Amount
Security Broking and fund Management service 100%
Spend
Financial Management Consultancy Services 70%
Spend
Accounting Services
70%
Man-Hour
Auditing Services
100%
Spend
Life Insurance services
100%
Spend
Pension funding services
100%
Spend
Non-life insurance services
70%
Spend
Insurance Broking Services
100%
Spend
Source: Schedule to the NOGICD Act 2010.
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TABLE 3.5 TRANSPORTATIOOkN/SUPPLY/DISPOSAL SERVICES
Description of Services Tugs/Remotely Operated vehicle (ROV)
Nigerian Content Measured Unit
(NC%) Unit
65%
Spend
Support/diving support vessels
Barges
95%
Spend
Accommodation platforms/vessels
90%
Spend
Disposal/Distribution and waste Transport 100%
Spend
service
Rental of Cranes and special vehicle
75%
Spend
Freight forwarding/Logistics Management 65%
Spend
service
Supply Base/Warehouse/storage services
70%
Spend
Truck package/product Transportation Services 100%
Spend
Source: Schedule to the NOGICD Act 2010.
TABLE 3.6 MARINE, OPERATIONS AND LOGISTICS SERVICES
Description of Services Telecommunication services
Nigerian Content Measured Unit
(NC%) Unit
90%
Man-Hour
Supply of crew men for domestic coastal 80%
Number
services
Driving/ROV/Submersible Operations
70%
Man-Hour
Hook-Up and Commissioning including 75%
Man-Hour
Marine Installation Services
Dredging Services
55%
Man-Hour/spend
Gravel and Rock Dumping Services
65%
Man-Hour/Spend
Floating Storage Unit (FSU)
45%
Man-Hour
Subsea pipeline protection services
55%
Man-Hour
Installation of Subsea package
60%
Man-Hour
Mooring system services
50%
Man-Hour
Ship Chandler Services
90%
Spend
Moving Services
100%
Man-Hour/spend
Ok
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Supply vessels Stand-by vessel
Ok 45% 55%
Domestic Clearing of Cargo
30%
Bunkering services
60%
marine insurance
40%
Marine Consulting
40%
Marine Logistic
30%
Source: Schedule to the NOGICD Act 2010.
Man-Hours/spend Spend Spend Spend Spend Spend Spend
TABLE 3.7 INFORMATION SYSTEM/INFORMATION
TECHNOLOGY/COMMUNICATION SERVICES
Description of Services Network Installation/support service Software Development and support services Computer Based Modeling Service Computer Based stimulation/Training Programs service CAL/CAP Services Hardware Installation/support service
Nigerian (NC%) Unit 85% 45% 51% 51% 51% 50%
Content Measured Unit Spend Spend Spend Append Spend Spend
Operating System Installation/support service
50%
Spend
User support/Help Desk Service
60%
Spend
Library Services
70%
Spend
IT Management Consultancy service
50%
Spend
Data Management service
50%
Spend
Telecommunication lines
60%
Spend
Data and message transmitting service
60%
Spend
Rental and telecommunication lines
75%
Spend
Telecommunication Subscription services
85%
Spend
Public Address services
95%
Spend
Other information systems (IS) information Technology 75% (IT) Services Source: Schedule to the NOGICD Act 2010.
Spend
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TABLE 3.8 Description of Services Site Clean-up services
HEALTH, SAFOEkTY AND ENVIRONMENT
Nigerian Content Measured Unit (NC%) Unit
100%
Man-Hour
Pollution Control
45%
Spend
Waste Water Treatment Service
65%
Man-Hour
Fire and Gas protection system service
50%
Man-Hour
Ventilation/Heating/Sanitary Services
85%
Man-Hour
Waste Disposal/Drainage Services
100%
Man-Hour
Industrial Cleaning service
100%
Man-Hour
Disposal/Distribution and waste Transport Service etc Safety Protection/security/fire fighting system service Preservation of Mechanical and Electrical
100% 90% 95%
Spend Man-Hour Man-Hours
components service
Equipment brokerage services
75%
Spend
Temporary Accommodation/camp services
80%
Spend
Catering services
100%
Spend
Cleaning and laundry services
100%
Spend
Security services
95%
Spend
Medical service
60
Services
Equipment Brokerage services
75%
Spend
Other supporting services
85%
Spend
Pollution control
90%
Man-Hours/spend
Source: Schedule to the NOGICD Act 2010.
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TABLE 3.9 MODIFICOAk TION AND MAINTENANCE
Description of Services
Nigerian Content Measured Unit
(NC%) Unit
Car Wash Equipment Maintenance/Service 90%
Spend
Canopy Equipment Maintenance/Services
Dredging services
90%
Spend
Signs and Accessories Maintenance/Service 55%
Spend
Services Station pumps Maintenance/Services 80%
Spend
Payment Terminal Maintenance/Service
65%
Spend
Services station Tanks Maintenance/service 80%
Spend
Subsea system
75%
Spend
Pipeline system
45%
Spend
Risers
60%
Spend
Umbilical
49
Spend
Terminal/Oil Movement System
51%
Spend
Accommodation/Officer/Workshop storage 70%
Volume
modules
Process Modules/packages
80
Spend
Utilities Module/package
65%
Tonnage
Drilling Modules/Packages
80%
Tonnage
Building Including services station
70%
Tonnage
Engineering modification and maintenance 90%
Tonnage
services for a site/platform
Source: Schedule to the NOGICD Act 2010.
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TABLE 3.10 EXPLORATION, SUBSOUkRFACE, PETROLEUM ENGINEERING AND SEISMIC
Description of Services 3D Seismic Data acquisition services
Nigerian Content Measured Unit
(NC%) Unit
100%
Spend
4D Seismic data processing service
55%
Spend
2D seismic data processing service
100%
Spend
Geophysical interpretation services
90%
Spend
Geological evaluation services (Organic
80%
Geochemistry, Petrology, Diagenesis,
Giostrigraphy, fluid, petrology, Digensis,
Giostraigraphy, Fluid Characterization, PVT,
Cor Analysis Services
Mud logging services
90%
Spend Spend
Coring services
90%
Spend
Well testing services
55%
Spend
Drilling rigs (Swamp)
60%
Man-Hour
Drilling Rigs (Semi submersible/jack 55%
Man-Hour
ups/others)
Drilling Rigs(Land)
70%
Man-Hour
Work-over Rigs (Swamp)
70%
Spend
Snubbing services
80%
Spend
Liner Float, Hangers and Running Equip. Serv. 55%
Spend
Field Development Plan
100%
Spend
2D Seismic Data Interpretation Services
100%
Spend
3D Seismic Data Interpretation Services
100%
Spend
4D Seismic Data Interpretation Services
55%
Spend
Drilling rigs (Land)
70%
Man-Hour
Source: Schedule to the NOGICD Act 2010.
A cursory examination of the above schedules reveals high level discrimination against foreign investors and foreign goods and services in the Nigerian oil and gas industry. In some cases, 100 per cent Nigerian content were provided. This
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constitutes outright prohibition, whiOckh is quantitative restriction outlawed by Article XI of GATT 1994 and Article 2.1 of the TRIMS Agreement. The subsequent provisions of the Act is not left out in the breach of WTO obligations. It further stipulated that the Nigerian content plan submitted to the Board by every operator shall contain a detailed plan, satisfactory to the Board, setting out how the operator and their contractors will give first consideration to Nigerian goods and services, including specific examples showing how first consideration is considered and assessed by the operator in its evaluation or bids for goods and services required by the project. (Underlined emphasis supplied). All such plan submitted by an operator or alliance partner shall contain detailed plan on how the operator or its alliance partner intends to ensure the use of locally manufactured goods where such goods meets the specifications of the industry.156 (Italics added for emphasis). It is beyond controversy that the above provisions placed import restriction and discriminates against foreign made goods in preference for locally manufactured goods. This further supports the writers position that the Act impinged on Nigerias WTO obligations. 3.4 Minimum Nigerian Content in Bid Evaluation The Act contains bidding and evaluation processes for procurement of goods and services, and contract awards for project execution that offers advantages to indigenous operators to the detriment of foreign goods, services and foreign investors. The procedure requires all operators and project promoters to consider Nigerian content when evaluating any bid where the bids are within 1% of each other at commercial stage and the bid containing the highest level of Nigerian content should be selected provided the Nigerian content in the selected bid is at least 5% higher than its closest competitor (Italics supplied for emphasis).
156 See sections 12 and 13 of the NOGICDA, 2010.
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The trade and investment restrictive lOegk islation even goes further to stipulate that all operators and alliance partners shall maintain a bidding process for acquiring goods and services which shall give full and fair opportunity to Nigerian indigenous contractors and companies (Italics added for emphasis).157 In order to sustain the researchers analysis, it is necessary to briefly highlight some provisions of WTO TRIMS, GATT and GATS 1994. Article 2:1 of the TRIMs Agreement provides as follows :"Without prejudice to other rights and obligations under GATT 1994, no member shall apply any TRIMs that is inconsistent with the provisions of Article 111.4 and Article XI of GATT1994. Article 2. 1 (a) of TRIMs and the illustrative list in the Annex to TRIMs prohibits measures (local content) which requires: "the purchase or use by an enterprise of products of domestic origin or from any domestic source, compliance with which is necessary to obtain an advantage, and which require the purchase or use by an enterprise of products of domestic origin from any domestic source , whether specified in terms of any particular products, in terms of volume or value of product or in terms of proportion of volume of its local production." There is no controversy that local content requirement is prohibited by the above TRIMs provision. It cannot also be contested that the above provisions of sections 3, 10, 11, 12, 13 and 14 of the NOGICDA 2010 on local content specification are clear infractions of Nigerias WTO obligations. In Canada - Administration of Foreign Investment Review Act (FIRA)158, a GATT Panel considered a complaint by the United States concerning certain types of undertakings or engagements which were effectively required from foreign investors by the Canadian Authorities as condition for approval of investment projects. Such undertakings relates to the purchase of certain products from domestic sources (local content requirement), and to the export of certain amount or percentage of output. (export performance requirement) The Panel found that 157 See sections 14 and 15 of the NOGICDA, 2010. 158 BISD 305/140, 1984.
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the local content requirements wereOkinconsistent with the national treatment obligation of Article III:4 of the GATT. Similarly, and more recently too, the WTO Panel in 2016 in India ­ Certain Measures on solar cells 159 , considered a complaint by the United States concerning certain measures of India relating to domestic content requirements under the Jawaharlal Nehru National Sola Mission (NSM) for solar cells and solar modules, in which certain percentage of solar panels were to be purchased from domestic sources. The US claimed that the regulation is inconsistent with Article III. 4 of GATT 1994 and Article 2.1 (a) of TRIMs Agreement. The panel upheld the US claims and declared the measures moot and invalid. The above panel ruling is particularly relevant to this study as it deals with energy which is similar to this study. It follows that the provisions of the NOGICDA 2010 so far analyzed impaired or nullified Nigerias WTO obligations, and should be withdrawn by way of law reform amending the infringing provisions of the Act to be in tandem with the nations international obligations.
3.5 Employment and Training Requirements of the Act In order to maximize job opportunities for Nigerians in the oil and gas industry, the substantive provisions of the Act creates detailed obligations on operators and project promoters to accord priority to the recruitment of Nigerians in the industry. Nigerians shall be given first consideration for employment and training in any project executed by any operator or project promoter in the Nigerian oil and gas industry (Italics added for emphasis). The Nigerian Content Plan to be submitted by any operator or project promoter in accordance with the Act must contain Employment and training plan (E and T plan) which shall include: a. An outline of the ­ 159 WT/DS 456/R, 24 February, 2016.
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i. hiring and training needs of theOokperator or project promoter and operators major contractors with a breakdown of the skills needed, ii. anticipated skill shortages in the Nigerian labor force, iii. project specific training requirements, and iv.anticipated expenditures that will be made directly by the operator in implementing the E and T plan as a forecasted and actual expenditure; b. a time frame for employment opportunities for each phase of project development and operations, to enable members of the Nigerian workforce to prepare themselves for such opportunities; c. The operator or project promoter shall report to the Board quarterly on employment and training activities for the reporting period and, compare this to the E and T Plan and the report shall include ­ i. Number of new employees hired during the year, ii. Their place of residence at the time of hiring, and iii. Their employment status; and d. Any other information required by the Board for the purposes of implementing the provisions of the Act. Where Nigerians are not employed due to their lack of training, the Act mandates the operator to ensure, to the satisfaction of the Board, that every reasonable effort is made within a reasonable time to supply such training locally or elsewhere and such effort and the procedure for its execution shall be contained in the operators E and T Plan. Furthermore, to realize the aim of the Act, every operator, in respect of each operation, is required to submit to the Board, a succession plan for any position not occupied by Nigerians, and the plan shall provide for Nigerians to understudy each incumbent expatriate for a maximum of four years, and at the end of four years period, the position shall become Nigerianized.
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On the other hand, the law permits eOakch operator or project promoter, in each of its Approval operations, to retain only 5% of management positions as may be approved by the Board as expatriate position to protect the interest of the investor. Approval for the engagement of an expatriate by an operator must first be sought and received from the Board before even making such application to the Ministry of Interior, or any other agency of the Federal Government.160 One cannot but agree that the intention of the NOGICDA 2010, is to Nigerianize the oil and gas industry. The law even provided for a 4 year succession plan to get rid of foreign investors in the sector. This is a clear case of investment restriction. Nonetheless, it is now 7 years since the inception of the law in 2010. This objective is yet to be accomplished. The reason is obvious. The requisite skills, technology, capital and the needed infrastructure base are still lacking in the country. Coupled with this is the high target set by the law, which is difficult to achieve. Recent research has shown that local content requirement may not succeed where high targets are set for investors as in the instant case. 161 The anti investment legislation created another shocking obligation for foreign investors in the nations oil and gas industry. The law requires all operators to recruit only Nigerians in the junior and intermediate cadre or any other corresponding grades designated by an operator or company.162 This constitutes restriction on trade in services and service supply contrary to Article XVII of GATS 1994. It is submitted that this investment restrictive enactment is counterproductive. Rather than generating the much needed jobs, it was recently reported that oil firms in Nigeria are laying off oil workers to cope with the oil price crash at the international market. The report says other oil firms have embarked on salary slash to stay in business. Yet, oil companies who could not cope with the situation have 160 See generally sections 28 ­ 33 of the NOGICDA 2010. 161 Local Content: Nigeria ­ Petroleum, A Study conducted by Columbia Centre on Sustainable Investment, 2015, p.1. 162 See section 35 of the NOGICDA 2010.
103 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 closed down their businesses.163 The Shell Petroleum Development Corporation Ok was quoted as saying, that it has sacked 2, 500 of its work force.164 It is, therefore, imperative to have a second look at the NOGICDA 2010 by way of amendment. Sadly, section 11 requires the Act to be reviewed every 2 years, but it is now 5 years after the first review is due in 2012 without the review seeing the light of the day. 3.6 Research and Development Requirements The Petroleum Minister is authorized by the Act to make regulations for the growth of research and development in the industry. Every operator shall float a program with detailed expenditure, to the satisfaction of the Board, for the promotion of education, attachments, training, research and development in Nigeria in relation to its work program and activities, for every project, in respect of which a plan has been submitted. In addition, each operator shall submit to the Board and update same every 6 months, the operators research and development plan (R and D Plan). The R and D plan shall: a. outline a revolving three to five years plan for oil and gas related Research and development initiatives to be undertaken in Nigeria, together with a breakdown of the expected expenditures that will be incurred in the implementation of the R and D plan; and b. provide for public calls for proposals for research and development initiatives associated with the operators activities. A quarterly report on R and D is to be submitted to the Board by every operator, which the Board shall compare with the R and D plan earlier submitted by the operator, to determine compliance thereto.165 163 Vanguard Newspaper, 28 April, 2015. p.1. 164 The Nigerian Business Newspaper, 8 June, 2015 .p. 1.Available at www.thenigerianbusiness.com/energy135html. 165 Sections 36 ­ 39 of the NOGICDA 2010.
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Another striking provision of the AOckt that borders on Quantitative Restriction is the requirement for international or multinational companies working through their Nigerian subsidiaries to demonstrate that a minimum of 50 % of the equipment deployed for execution of work are owned by the Nigerian subsidiaries (Italics added for emphasis)).The law mandates the Minister of Petroleum Resources to make regulations setting out targets aimed at ensuring: a. full utilization and steady growth of indigenous companies engaged in exploration; b. seismic data processing; c. engineering design; d. reservoir studies; e. manufacturing and fabrication of equipment; and f. other facilities as well as the provision of other support services for the Nigerian oil and gas industry.166
3.7 Transfer of Technology Requirements The NOGICDA 2010 made elaborate provisions for the infusion of oil and gas technologies into Nigerians by foreign investors in the sector. It requires all players in the industry to transmit to the Board on annual basis, a plan, to the satisfaction of the Board, describing a program of planned initiatives, aimed at promoting the effective transfer of technologies from the operators and alliance partners to Nigerian individuals and companies. The operators are bound to support the transfer of technology policy by encouraging the formation of joint ventures, partnering and the development of licensing agreements between Nigerians and foreign contractors and service or supplier companys agreements for all such joint ventures or alliances. All such arrangements must strictly conform to the Nigerian content development, to the satisfaction of the Board. 166 See section 41 (2) of the NOGICDA 2010.
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Annual report on technology transfeOrkmust be submitted to the Board every year by all operators and project promoters, stating its technology transfer initiatives and the results achieved within the period under review. The Petroleum minister is authorized to make regulations setting out targets on the number and type of such joint ventures or alliances to be achieved for each project. The Minister is also mandated to make regulations directing any operator to establish a facility, factory, production units or other operations within Nigeria for the purposes of carrying out any production, manufacturing or for providing a service otherwise imported into Nigeria. Fiscal and tax incentives are to be given to foreign or indigenous companies which establish facilities, factories, production units or other operations in Nigeria for purposes of carrying out production, manufacturing or for providing services and goods otherwise imported into Nigeria. (Italics added for emphasis).167
3.8 Requirements for Provision of Specialized Services 3.8.1 Insurance and Reinsurance Services Market access to trade in services is severely restricted with many barriers created in the Act. All operators, project promoters, alliance partners and Nigerian indigenous companies involved in any category of business enterprise or contract in the Nigerian oil and gas industry, shall insure all insurable risks related to its oil and gas business, operations or contracts with an insurance company, through an insurance broker registered in Nigeria under the provisions of the Insurance Act as amended. Every operator is required to submit to the Board, a list of all insurance companies and insurance brokers through which insurance covers were obtained in the preceding 6 months, the class of insurance cover obtained and the expenditures incurred by the operator. All such insurance program shall contain: 167 See sections 44 ­ 48 of the NOGICDA 2010.
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i. insurance covers obtained for theOlkast 6 months and the cost of the insurance policy, ii. a forecast of insurance covers required during the next 6 months, and iii. the projected expenditures for the insurance covering: a list of: a. all insurance companies brokers through which insurance covers were secured in the preceding 6 months, b. the class of insurance covers secured, and c. the expenditures incurred by the operator; and d. the annual insurance premium budget for the past one year in Naira and foreign currencies. With regard to offshore insurance risk, the Act requires that the approval of the National Insurance Commission must be sought and obtained prior to the insurance of such risk. The said commission shall ensure that the Nigerian Local Content requirements have been completely exhausted.168 3.8.2 Legal Services Requirements The NOGICDA 2010 placed total embargo on the engagement of foreign legal practitioner for provision of any kind of legal services in the Nigerian oil and gas industry. It specifically mandates all operators in the sector to retain only Nigerian legal practitioners or a firm of Nigerian lawyers whose office is situated in any part of Nigeria. The operators are compelled to furnish the Board with its Legal Services Plan (LSP) every 6 months. The LSP shall contain­ a. comprehensive report on: i. legal services utilized in the past 6 months and the value of such services, ii. a forecast of legal services required during the next 6 months and iii. the estimated expenditure for such services;
168 See sections 49 and 50 of the NOGICDA 2010.
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b.a list of ­
Ok
i. external solicitors utilized for legal services in the past 6 months,169
ii. the nature of work executed, and c.the annual legal services budget for the past one year in Naira and foreign currencies.170
It must be observed that, although the above provision is highly discriminatory
and restrictive of trade in services, nevertheless, Nigeria is not culpable, as it made
no specific commitments to the GATS Schedule regarding legal services.
Insurance services were also excluded in Nigerias financial services. No
international obligation is breached by the above requirements of the Act.
3.8.3 Financial Services Requirements
All operators carrying out any financial transaction in the nations oil and gas
sector are mandated to retain only Nigerian financial institutions or organizations
except where the Board is satisfied that it is impracticable to do so.(Italics supplied
for illumination).
The operators shall submit details of their Financial Services Plan (FSP) to the
Board every 6 months. The FSP must contain ­
a. details of financial services utilized for the preceding 6 months
b. a forecast of financial services needed for the subsequent 6 months;
c. The projected expenditure for the services;
d. A list of ­
di. Financial services utilized for the past 6 months,
dii. The nature of financial services provided, and
diii. The cost of the financial services rendered during the period;
e.a list of ­
i. financial services utilized for the past 6 months,
ii. the nature of financial services provided, and
iii. the expenditure incurred by the operator for making such financial services.
170 See sections 50 and 51 of the NOGICDA 2010.
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All operators, contractors, subcontOrkactors are required to maintain a bank account in Nigeria into which shall retain a minimum of 10 per cent of its total revenue accruing from its Nigerian operations.171 The foregoing provision is a derogation of Nigerias GATS commitment with respect to financial services. No qualification or limitation is placed on foreign investors banking services in the Nigerias schedule of 2010.172
3.9 Prohibition of Importation of Welded and Fabricated Products The Act conspicuously banned the importation of all kinds of welded or fabricated products into Nigeria. All operators, project promoters, contractors and any other entity operating in the Nigerian oil and gas industry, shall carry out all welding and fabricated operations in Nigeria. Accordingly, products such as manifold, thermoplastic pipes, metal products, steel, etc can no longer be imported into Nigeria.173 This quantitative restriction constitutes an aberration to Article XI of the GATT 1994, and impinged on Nigerias WTO obligation. The researcher shall deal with quantitative restriction and the NOGICDA 2010 in greater detail in chapter 5 of this dissertation. Although the Act terminates at section 106, the interpretation section, the above analysis covers the sections relevant to this study.
3.10 Conclusion This chapter has chronicled the main objectives of the NOGICDA 2010.It aims to maximize the potentials of the oil and gas industry for the benefit of Nigerians and the economy at large through enhanced indigenous participation in the industry, and the use of Nigerian goods and services to run the industry. 171 See section 52 of the NOGICDA 2010. 172 See Nigerias GATS Schedule of Commitment at http://www.wto.org/english/tratop_e/serv.commitments_ehtm#commit_exempt , accessed on 31 July, 2016. 173 See section 53 of the NOGICDA 2010.
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Regulatory and institutional frame wOokrks were created to achieve this laudable initiative. Unfortunately, the substantive provisions of the Act, in particular, sections 3, 10, 11, 12, 41 (2) and 53 of the law undermines Nigerias TRIMS, GATT, GATS, 1994 and national treatment standard under foreign investment law. The offending provisions shall be examined in greater details in chapter 5 of this research to sustain the writers findings.
110 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 Ok Chapter 4 The Inconsistency of NOGICD Act with Domestic Laws 4.1 Introduction The enactment of the Nigerian Oil and Gas Industry Content Development Act has a sweeping effect on several existing Nigerian Laws. Among the statutes affected include the 1999 Constitution of the Federal Republic of Nigeria (as amended), the Petroleum Act of 1969 (as amended) the Nigerian Investment Promotion Act, National Office of Technology Acquisition and Promotion Act (NOTAP), The Companies and Allied Matters Act, Nigerian Bilateral Investment Treaties with some countries and a host of other legislations. The influence of the NOGICDA on the above legislations is one of policy summersault and breach of Nigerias obligations under international law. Other consequences of the NOGICDA include duplication of functions, power tussle and inefficiency in the Oil and Gas Industry. It also has the potency of opening a flood gate for litigation among the contending institutions. This chapter is therefore devoted to beaming a search light on the effect of the NOGICDA on the existing Nigerian Legislations. 4.2 The 1999 Constitution of the Federal Republic of Nigeria (as amended) The constitution of Nigeria is the grand norm and the Supreme law of the land. Section 1 (1) of the constitution proclaims the supremacy of the Constitution on all persons and authorities within the federation. Section 1 (3) of the Constitution declares void any other law whose any of its provision is inconsistent with the provisions of the constitution. Thus, in the case
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of Governor Ekiti State of Nigeria VOk. Olubunmo174, The Supreme Court of Nigeria held that section 23B of the Local Government Administration (Amendment) Law, 2001 of Ekiti State is inconsistent with the provision of section 7(1) of the Constitution and therefore null and void. The same position was reiterated by the same Apex Court of Nigeria in the case of Tony Momoh v. Senate of the National Assembly & Ors175, the provision of Section 31 of the Legislative (Powers and Privilege) Act,176 which provided that court processes cannot be served within the chambers or precincts of a legislative house during inconsistent with the Provisions of Section 42 of the 1979 Constitution (Now 1999 Constitution). The Supreme Court of Nigeria declared, "It cannot but suffer the fate reserved for such legislation by Section 1 (3) of the Constitution which proclaims the supremacy of the constitution and declares void any law inconsistent with its provisions". Under Section 19 (c) and (d) of the 1999 Constitution, Nigeria pledged her commitment to respect international law and Treaty obligation, and to eliminate all forms of discrimination in all its manifestations (Emphasis supplied). Unfortunately, this avowed commitment is undermined by Section 3, 11, 12, 53 and the schedules to the NOGICDA 2010 which impugned Nigeria international obligations under WTO Agreement, the TRIMS, GATT and GATS, 1994. It follows that the NOGICD Act should be declared void by a court of competent jurisdiction in Nigeria for violating Section 19 (c) and (d) of the 1999 Constitution of Nigeria. The National Treatment obligation under GATT and prohibition of Quantitative Restriction have all been flaunted by the NOGICDA by providing for preferences for Nigerian made goods and services and outright ban of importation of some products.
174 (2017) 3NWLR (Pt 1551) page 1, Ratio 5. 175 (1981) INCLR p.21. 176 Cap. 102, Laws of the Federation of Nigeria and Lagos 1958.
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4.3 Nigerian Investment PromotioOnkCommission Act177 The Nigerian Investment Promotion Commission Act (NIPC) was promulgated by Decree No 16 of 1995. The aim of the Act is to encourage and promote investment in all sectors of the economy and to support measures which shall enhance investment climate in Nigeria for both Nigerian and non-Nigerian investors178 (emphasis added). The only exception to investment promotion handed down by this Act is as provided in Sections 18 and 31 of the NIPC Act. According to this provision, both Nigerians and foreigners are prohibited in the negative list from engaging in productive ventures such as: (a) production of arms and ammunition, etc; (b) Production of dealing in narcotic drugs and psychotropic substances; (c) Production of military and paramilitary hardwares and accoutrement, including those of the police and the custom, immigration and prison services. It is instructive to note that none of the negative list stated above included the products identified in Tables 1 ­ 10 of Chapter 3 of this research, neither is Oil and Gas part of the negative list. It is therefore a policy summersault for the NIPC Act to promote investment on the one hand, and the NOGICD Act 2010 to restrict investment on the other hand. It must also be observed that section 4 of the NIPC Act recognizes Nigerian and non-Nigerian investors in the task of investment promotion in Nigeria. Ironically, the NOGICD Act is antithetical to foreign investment as identified in tables 1 ­ 10 of Chapter 3 above.
177 Cap. N117 Laws of the Federation of Nigeria, 2004. 178 See section 4 (b) of the NIPC Act.
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4.4. National Office for Technology AOckquisition and Promotion Act179 The National Office for Technology Acquisition and Promotion is a parastatal under the Federal Ministry of Science and Technology. It was established in 1979 to, among other things, facilitate and implement the acquisition, promotion and development of technology. In compliance with NOTAP Act, all agreement for transfer of technology between Nigerian enterprise and foreign investors must be registered and supervised by the agency.180 The NOTAP Act authorizes the agency to oversee technology transfers such as: (a) Engineering Services, (b) Technical Assistance, (c) Know-how licences, (d) Trade Mark Licenses (e) Construction and installation service. In contrast, the Nigerian Content Monitoring Development Board established by the NOGICD Act 2010 has similar objective for the promotion of technology transfer and value addition. This has generated friction and function overlap between the two sister agencies. The Nigerian Energy Commission, Nigerian Science and Engineering Commission, Nigerian Petroleum Technology Institute and the Petroleum University were all established for the purpose of promoting the transfer of technology as well as research and development in the oil and gas sector of the nations economy. This amounts to duplication of function capable of instigating power tussle among the various institutions charged with similar responsibilities.
4.5 The Department of Petroleum Resources and the Nigerian Content Division 179 Cap. N62 Laws of Federation of Nigeria 2004. 180 See section 5 (2) of NOTAP Act, Cap N62 LFN 2004.
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The Department of Petroleum ResoOukrces (DPR) was established in 1970 as department under the Federal Ministry of Mines and Power. Then came the Nigerian National Oil Corporation (NNOC) in 1971. In 1975, however, the DPR was elevated to a full-fledged Ministry of Petroleum and Energy. Subsequently, in 1977, the Decree No.33 of that year, merged the Ministry of Petroleum with the NNOC to form the Nigerian National Petroleum Corporation (NNPC) to regulate the petroleum industry. In 1988, the DPR was re-established and transferred to the Ministry of Petroleum Resources. The core mandate of DPR and the Nigerian Content Division of the Ministry include among other things, the development and enforcement of Nigerian content in the oil and gas industry, promotion of the use of locally available raw materials in preference to previously imported goods, transfer of technology to Nigerians, employment and training of Nigerians in the oil and gas industry. It is a statutory body charged with the duty of enforcing compliance with petroleum laws, regulations and guidelines in the industry. Sadly, Sections 4 and 5 of the NOGICD Act 2010 now vest the same mandate on the Nigerian Content Monitoring Development Board. This duplication of function does not augur well for the juicy industry. The writer therefore prescribes strengthening of the existing institutions and scraping of the Nigerian Content Monitoring Development Board to avoid unhealthy rivalry in the industry.
4.6 The Companies and Allied Matters Act181 The Companies and Allied Matters Act authorizes a foreign firm or an alien wishing to carry on business in Nigeria to take all necessary steps to register and/or
181 Cap. C 20 LFN, 2004.
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obtain incorporation as a separate entitOyk in Nigeria prior to the commencement of his business activities.182 Regrettably, even when a foreigner has complied with all registration formalities, he cannot engage in any of the businesses with 100% Nigerian Content as set out in various columns in Tables 1 ­ 10 of Chapter 3 of this dissertation. This unfriendly investment climate has led to sudden decline in the number of foreign firms registered in Nigeria since the inception of the NOGICD Act 2010. The researcher is inclined to suggest a repeal of the NOGICD Act to tiger off Foreign Direct Investment (FDI) inflow into Nigeria to boost the countrys economy.
4.7 Breach of Nigeria's BITs by the NOGICD Act
BITs are investment agreements between two countries aimed at facilitating investment flows between them183. These agreements seek to provide protections to
nationals of one country which are investing in the host country. The number of
BITs has grown significantly in recent years driven by the need for developing
countries to attract FDI as well as the prevailing market philosophy of globalization and liberalization184. Nigeria has entered into a number of BITs with
various countries detailed in the table below.
TABLE 4.1 BITs ENTERED INTO BY NIGERIA
Country
Date of signature
Date of entry into force
France
Feb 27,1990
Aug 19,1991
United Kingdom
Dec. 11, 1990
Dec 11, 1990
Netherlands
Nov 2, 1992
Feb 01, 1994
182 See Section 54 of CAMA, Cap. C 20 LFN 2004. 183 Lorenzo Cotula, "Investment Treaties", International Institute for Environment and Development ("IIED") Sustainable Markets Investment Briefings, Briefing 2, http://www.iied.org/pdfs/17013111:Dpdf, visited on the 25th of May, 2010. 184 David Gantz, "Investor-State Arbitration under ICSID, the ICSID Additional Facility and the UNCTAD Arbitral Rules", http://www.usvtc org/trade/other/Gantz/Gantz ICSID, visited on the 25th of May 2010 and UNCTAD, note 11 above.
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Taiwan Province of China
April 7, 1994Ok
Turkey
Oct 8, 1996
China
Aug 27, 2001
Republic of Korea
March 27, 1998
Romania
Dec 18, 1998
Bulgaria
Dec 21, 1998
Germany
Mar 28, 2000
Egypt
June 20 2000
Switzerland
Nov 30, 2001
Sweden
April 18, 2002
Serbia
June 1, 2002
Spain
July 9, 2002
Jamaica
Aug 5, 2002
Uganda
Jan 15, 2003
Ethiopia
Jan 19, 2004
Finland
June 22, 2005
Source: UNCTAD BITs Database.
April 7,1994 Feb 01, 1999 June 3, 2005 Sept 20, 2007 April 1, 2003 Feb 7, 2003 Jan 19, 2006 Mar 20, 2007
A number of these BITs include national treatment provisions, for the purpose of this dissertation, the writer shall focus on the BITs in English language, the text of which are made available on the UNCTAD website. These are the treaties with the United Kingdom, Netherlands, Republic of Korea, Spain, Finland, Germany, Turkey &. Egypt. 4.7.1 The United Kingdom The United Kingdom BIT, like most of the BITs, has not yet been incorporated into Nigerian law by an act of the National Assembly, and as such, following the provisions of Section 12 of the Constitution discussed
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above,185 does not have the force of lOakw in Nigeria and its provisions cannot be enforced by recourse to Nigerian courts. Nevertheless, a party to the treaty may have recourse to ICSID arbitration tribunal. This will make Nigeria to incur liability for breach of her national treatment obligation under international law. Article 3(1) provides for the national treatment: standard of this BIT. It states; Neither Contracting Party shall in its territory subject investment or returns of nationals or companies of the other Contracting Party to treatment less favourable than that which it accords to investments or returns of its own nationals...(Emphasis added). Investment" is defined as "every kind of asset and in particular, though not exclusively, includes: 1. Movable and immovable property and any other property rights such as mortgages, liens or pledges; 2. Shares in and stock and debentures of a company; 3. Claims to money or to any performance under contract having a financial value; 4. Intellectual property rights, technical processes, know-how and goodwill; 5. Business concessions conferred by law or under contract including concessions to search for, cultivate, extract or exploit natural resources, The term "investments" includes those made before the entry into the BIT and those made subsequently. The breadth of the definition of "investments" in this BIT clearly extends to the activities of United Kingdom service providers in the oil and gas sector (emphasis supplied). The effect therefore,
185 This is provided for in section 12 of the 1999 Constitution of the Federal Republic of Nigeria (as Amended)
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in the context of the writers findinOgks, is that the BIT requires that those oil and gas service providers from the United Kingdom, must be extended treatment no "less favourable" than those of Nigerian investors. 186 , that is, treatment at least as favourable as those given to Nigerian investors although It should be noted that the national treatment standard in this BIT does not include qualifications such as "like situations", "similar situations" or "like circumstances", which suggest the applicability of the principle to firms in comparable business situations, and has been interpreted as referring to firms involved in the same business or economic sector.187 Thus it appears that in interpreting national treatment in this wider, unqualified context, there is no recourse to a sectoral basis of comparison. The definition of national treatment in this BIT also refers to "returns", which are defined as "...the amount yielded by an investment and in particular, though not exclusively, includes profit, interest, capital gains, dividends, royalties and fees". These returns must also be treated in a manner which is at least as favourable as those of Nigerian investors. It should be noted that the BIT provides for limited exceptions to the national treatment obligation under Article 7. These are in relation to "any
186 The "less favourable" standard may indeed be interpreted as suggesting that the United Kingdom investors may be granted more favourble treatment than national investors. See also C.S. Ayonmike, The Nigerian Local Content Act and its implication on Technical and Vocational Education and Training and the Nations Economy, European Centre for Research Training and Development, UK, Vol. 3, No. 1, January 2015, p. 26. 187 See S.D Myers v. Canada Partial Awards on the Merit, 13 November 2000, http://www/naftaclaims.com/Disputes/Canada/SDMyers/SD Myers/Merits/award.pdf, last visited on the 25th of May 2010. In this case the panel interpreted the phrase "like circumstance" in the context of national treatment and in arriving at its decision considered that the foreign investor and it Canadian partners were engaged in proving the same service. However, see the case of accidental Exploration and Production Company", The Republic of Ecuador Final Award of 1 July 2004. London Court of International Arbitration Administered Case No. UN 3467 , http://ita.law.uvic.ca/documents/OxyEduadorFinal Award 001.pdf, last visited on the 25th of May 2010, in which a much wider interpretation was given in relation to the "like situation" formulation of national qualification, see generally AderemiOgbunbanjo. See also Michael Ibanga, The Local content Act, Petroleum Industry Bill and National Development a conference paper delivered at the Nigerian Association of Law Teachers Annual Conference 2011 held at the Rivers State University of Science and Technology, Port Harcourt, Nigeria, July 18th ­ 21st, 2011.
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existing or future free trade zone,Okcustoms union or regional economic organization or any similar international agreement to which either of the Contracting Parties is or may become a party, or any international agreement or arrangement relating wholly or mainly to taxation or any domestic legislation relating wholly or mainly to taxation 188 .The Nigeria United Kingdom BIT extends a right of action to nationals or companies of the Contracting Parties.189 Any dispute arising between a national or company concerning an investment in the territory of the other Contracting Party may be referred for conciliation or arbitration at the International Centre for the Settlement of Investments Disputes ("ICSID") under the Convention on the Settlement of Investment Disputes between States and Nationals of other States ("ICSID Convention"). It should be mentioned that the BIT was to remain in force for an initial period of ten years (that is 2001), after which it continues in force until the expiration of twelve months notice of termination given by one Contracting Party to the other. We are not aware that such a notice has been given by the Nigerian or the United Kingdom governments.190Nevertheless, its provisions would continue with respect to investments made prior to the termination of the BIT for a period of fifteen years.191 On the whole, the above analysis reveals that Sections 3(2), 11, 12 and the schedule to the NOGICD Act, 2010, which discriminates against foreign investors and extends more favourable treatment to Nigerian goods and
188 This suggestion that in this context, the Nigerian or indeed the United Kingdom government could employ some form of discrimination or preferential treatment through the use of tax mechanisms. 189Article 8 of the BIT. A company which is incorporated under the law in force of the territory of one contracting party and in which before a dispute arises, the majority of shares are owned by nationals or companies of the other contracting party shall be treated as a company of the other contracting party. 190 It should be noted that this treaty is listed as one of Nigerias subsisting treaties on the UNCTAD Website ­www.unctad.org. 191 Michael Ibanga, The Local content Act, Petroleum Industry Bill and National Development a conference paper delivered at the Nigerian Association of Law Teachers Annual Conference 2011 held at the Rivers State University of Science and Technology, Port Harcourt, Nigeria, July 18th ­ 21st, 2011.
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services are in clear breach of NigerOiaks National Treatment Obligation under the WTO Law. 4.7.2 The Netherlands The BIT between Nigeria and the Netherlands, like the United Kingdom BIT, has not yet been incorporated into Nigerian law. The Netherlands BIT does not appear to include a c l as s i c "national treatment" clause. The Contracting Parties are therefore at liberty to offer preferential treatment to their national firms where it is deemed necessary. 4.7.3 Republic of Korea The national treatment provisions of the Korean BIT are very similar to those of the United Kingdom. It provides that "each Contracting Party shall accord in its territory to the investments or returns of nationals or companies of the other Contracting Party, treatment that is not less favourable than that which it accords to the investments or returns of its own nationals or companies or to the investments or returns of nationals or companies of any third State". 192 The definitions of "investments" and "returns" are also similar and so are the exceptions to the national treatment obligations under Article 7. Therefore, in terms of national treatment, the same standards appear to apply with respect to investors from Korea and the United Kingdom. The Korean BIT also allows for dispute resolution via the ICSID Convention.193 4.7.4 Spain The national treatment obligations included in the BIT with Spain are in all respects similar to those discussed above. The BIT however does not include any exceptions to the national treatment clause and as such the preferential treatment possible in domestic tax legislation with respect to the treatment of United
192 Article 3 of the BIT between the Federal Republic of Nigeria and the Republic of Korea. 193Article 8of the BIT between the Federal Republic of Nigeria and the Republic of Korea.
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Kingdom and Korean investors, would nOok t be allowable in relation to the treatment of Spanish investors. The Spanish BIT provides different channels for the resolution of disputes in addition to ICSID. The BIT provides for the resolution of disputes through the municipal courts of the country in which the investments were made or through an ad-hoc tribunal set up under the arbitration rules of the United Nations Commission on International Trade Law ("UNCITRAL"). The choice of arbitral rules lies with the investor. 4.7.5 Germany Article 4(1) of the German BIT provides that, "neither Contracting Party shall subject investments in its territory owned or controlled by investors of the other Contracting Party to treatment less favourable than it accords to its own investors...".This definition is similar to the national treatment provisions already discussed. The exceptions provisions are however quite different and provide that "...either Contracting Party may grant to its own investors special incentives for development purposes in order to stimulate the creation of local industries, especially small and medium-sized industries, provided that they do not significantly affect the investments and activities of investors of the other Contracting Party". 194 This introduces a development clause or development exception.195These clauses have been utilized to provide flexibility, particularly for developing countries, in recognition of the lower level of development of local companies. Such clauses allow governments to grant preferential treatment to national investors where it is considered necessary for economic development.196In this case, its use is however subject to the proviso that it does
194Article 4 (2), ibid Emphasis added. 195 C.S. Ayonmike, The Nigerian Local Content Act and its implication on Technical and Vocational Education and Training and the Nations Economy, European Centre for Research Training and Development, UK, Vol. 3, No. 1, January 2015, p. 26. 196Ibid.
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not "significantly affect" investors Ookf the other Contracting Party. Such a determination would have to be made on a factual and case by case basis. Disputes under the German BIT are to be settled through the ICSID channel. 4.7.6 The Finland The Finnish BIT's national treatment obligations are that "Contracting Party shall accord to investors of the other Contracting Party and to their investments, a treatment no less favourable than the treatment it accords to its own investors and their investments with respect to the acquisition, expansion, operation, management, maintenance, use, enjoyment and sale or other disposal of investments." The practical effect of the qualifications is that the national treatment standard would not apply to any activity not enumerated.197 It should be noted that the Finnish BIT allows for exceptions similar to those allowed under the United Kingdom BIT and its dispute resolution provisions, similar to those of Spain, allow for investor choice between municipal courts, ICSID, or an adhoc tribunal.198 4.7.7 Turkey Article 11(2) of the Turkish BIT provides that, "Party shall accord to ...investments...treatment no less favourable than that accorded in similar situation(sic) to investments of its investors...". This is the only BIT which Nigeria has signed, which includes "similar situations" formulation as a basis of comparison of the treatment accorded to foreign investors. The dispute resolution provisions allow for ICSID arbitration, ad hoc tribunals under UNCITRAL Arbitration Rules, or arbitration under the ICC regime.
4.8 National Treatment under Nigeria BITs The national treatment obligations under Nigeria's BITs are quite similar and are likely to be interpreted to convey like benefits to the investors of the relevant 197 Ibid. 198Article 10 of the BIT between the Federal Republic of Nigeria and the Republic of Korea.
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countries. Key distinctions arise in rOeklation to the exceptions to the national treatment provisions in the German BIT, which has the effect of excluding the applicability of national treatment in order to facilitate economic development. This provides a significant exception for Nigeria, where the need arises. It is also worth noting the inclusion of this "similar situation" formulation in the Turkish BIT, which would have the effect of limiting the scope of application of the national treatment provisions. The effect of the majority of these clauses is that Nigerian investors are not to be accorded preferential treatment in relation to their investments over the nationals of the BIT countries. In the position that they are, liability would arise for Nigeria, where a dispute is referred to international arbitration.
4.9 Breach of National Treatment Obligation of BITs by the NOGICD Act. 4.9.1 Nigerian Content: Definition and Background The NOGICD Act defines Nigerian content as the quantum of composite value added to or created in the Nigerian economy by a systematic development of capacity and capabilities through the deliberate utilization of Nigerian human, material resources and services in the Nigerian oil and gas industry... 199 The definition focuses on the addition of value to the Nigerian economy, which would be through the use of Nigerian goods, services and labour. The objective of the Act is to increase the level of Nigerian content in the oil and gas industry. 4.9.2 Nigerian Content Instruments In seeking to actualize its objectives, a number of instruments have been incorporated into the provisions of the NOGICD Act. These instruments include the requirements of:
199 Section 109 of the NCA.
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Exclusive "consideration" for Okindigenous companies in certain circumstances; the components of exclusive consideration are highlighted below: 1. First "consideration" for Nigerian companies; 2. "Full and fair opportunity" 3. Employment & training plans; and 4. Research and development plans. This section examines these instruments with a view to highlighting the ways by which they seek to increase Nigerian content in the oil and gas industry. 4.9.3 Exclusive Consideration Exclusive consideration is required only once in the Act under Section 3(2) which provides that Nigerian indigenous service companies which demonstrate ownership of equipment, Nigerian personnel and capacity to execute shall be given "exclusive consideration" in the bid on land and swamp operating areas of the Nigerian oil and gas industry for contracts and services contained in the schedule to the Act. A Nigerian company is a "...company formed and registered in Nigeria in accordance with the provisions of the Companies and Allied Matters Act with not less than 51% shares by Nigerians".200This means that companies in which majority shares are held by foreign investors (that is those which would be treated as "investors" under various BITs) would not fall within this definition and as such would not be entitled to "exclusive consideration" in this regard. The Act does not define the term "exclusive consideration", but its use suggests that only Nigerian companies or nationals who demonstrate the qualities indicated in Section 3(2) of NCA would be allowed to bid with respect to certain services. 4.9.4 First Consideration Section 3(1) of the NOGICD Act provides that "Nigerian independent operators shall be given first consideration in the award of oil Blocks, oil field licenses, oil lifting licenses... subject to the fulfillment of such conditions as may be specified
200 See section 109 of the NCA.
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by the Minister." Similarly, the term "fiOrkst consideration" is not defined. It may be reasonably suggested that this obligation requires that in seeking to award oil blocks etcetera, the national, authorities must initially look for Nigerian operators and only in the position that they do not fulfill the conditions specified by the minister or are unwilling or unable to take up these acreages, would foreign oil and gas operators be called upon. Sections 7-8 of the NOGICD Act require that in any bids for licenses, permits or interests or before an operator carries out a project in the Nigerian oil and gas industry, the operator must submit a Nigerian Content Plan to be approved by the Nigerian Content Development & Monitoring Board ("NCMB") by the issuance of a certificate of authorization. Such a plan must include details of how the operator and its contractors will give "first consideration" to the utilization of Nigerian goods and services. "Nigerian goods & services" are not defined under the NOGICD Act, but the former may be reasonably interpreted as goods manufactured in Nigeria, whilst the latter would refer to services provided by Nigerian companies (as defined under the NOGICD Act). The failure of an operator to satisfy the NCMB as to its process for ensuring first consideration for Nigerian goods and services is likely to lead to a denial of the certificate of authorization and thus the inability to carry out the project or to obtain the necessary licenses/permits. It should further be noted that compliance with the provisions of the Act, would be a major criterion in the award of licenses, permits, or other interests in the Nigerian oil and gas industry. Therefore where an operator is not in compliance with the provisions of the NOGICD Act, it runs the risk of not being granted future licenses/permits. Under section 16 of the NOGICD Act, a Nigerian service provider may still be awarded a contract, where its bid does not exceed the lowest bid price by ten per cent. This privilege is not granted to foreign investors.
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4.9.5 Full and Fair Opportunity Ofokr Indigenous Oil and Gas Services Companies Section 15 of the Act requires that all operators should maintain a bidding process for acquiring goods and services, which shall give full, and fair opportunity to Nigerian indigenous contractors and companies. Again "full and fair opportunity" is not defined, however in practice, it would require that Nigerian companies are given adequate notice of tenders and have access to the necessary information required to bid as their foreign counterparts would. This in itself does not appear to be a discriminatory measure and only seeks to ensure that Nigerian companies are treated in an equitable manner. 4.9.6 Employment, Training, Research and Development Obligations Nigerian content obligations also extend to the use and training of Nigerian labour as well as the promotion of research in Nigeria. These obligations do not appear to be the subject of any of the treaties examined in section 3 above and as such are not discussed here. 4.9.7 Legal Effect of Nigerian Content Obligations on Nigeria's National Treatment Obligations and Available Dispute Resolution Mechanisms The common denominator of most of the obligations discussed above is that they require some form of positive discrimination or preferential treatment in favour of Nigerian goods and/or services provided by Nigerian nationals/companies or Nigerian operators. In particular, the requirements for exclusive consideration of Nigerian service providers in land and swamp operating areas; first consideration for Nigerian goods and services in the Nigerian Content Plan, as well as for Nigerian operators in the award of licences and permits; are not compatible with Nigeria's national treatment obligations in international treaties. In the opinion of the writer, the requirements for "full and fair
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opportunity" for Nigerian goods and sOekrvices as well as the provisions in relation to labour and research are incompatible with the national treatment obligations discussed above. The provisions in relation to preferential treatment for goods are in conflict with the Nigerian national treatment obligations and as such, an action may be brought by a WTO member country under the WTO dispute resolution mechanisms. The provisions in relation to services also appear to be incompatible with Nigeria's national treatment obligations under GATS. It should however be noted that these obligations are limited generally to those four service sectors as earlier mentioned. Subject of course to the qualifications stated in Nigeria's services schedule and in particular to financial and transport services.201 The details of the influence of the capital NOGICD Act on global trade and investment law as it pertains to GATS shall be fully explored in chapter 5 of this work. As dispute resolution under the WTO Agreements is brought by member countries, any companies which feel discriminated against would need to lobby their governments to initiate action against the Nigerian government under the WTO dispute resolution mechanisms. Disputes under the WTO Agreements are resolved under the Uruguay Round Understanding on Rules and Procedures Governing the Settlement of Disputes known as Dispute Settlement Understanding (DSU). Once a dispute is brought by a WTO country member, a panel would be set up to settle the dispute. The duty of the panel is to examine whether the measures complained of are in conflict with a WTO covered agreement. Where a panel finds that the measure complained of does not conform to WTO rules, it would so declare and may recommend the steps to be taken to bring them into conformity. Such recommendations may include requiring the offending member country to withdraw (or modify) the offending measure. Compensation or suspension of concession or other obligations are
201 See sections 50 and 52 of the NCA for local content policy for financial services and for transportation services (see the schedule to the NCA).
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alternative remedies available to an Oakggrieved country member. In this regard, where all or any of the local content instruments discussed above are found to breach WTO rules, as indeed is the case with the provisions of the NOGICD Act highlighted above, Nigeria may be required to amend or repeal these obligations. 4.9.8 Legal Effect of NOGICD Act on Nigeria's Bilateral Investment Treaties The NOGICD Act obligations also appear to breach the national treatment obligations under the various BITs examined above. The development exception granted under the German BITs however, may be applicable as long as the conditions of that exception can be shown to be fully met by the NOGICD Act. Where this is the case, German companies discriminated against may not be able to claim for failure to be accorded national treatment. It must be noted that under the BITs reviewed, an investor that is discriminated against by the NOGICD Act would have a right, of direct enforcement and may refer a dispute for resolution under the relevant international arbitration regime. It is suggested that the holder of the right to refer the action is the party discriminated against and not every party which suffers or may suffer a negative effect from the discriminatory action. Foreign operating companies would have a right to claim in relation to the right of "first consideration" granted to Nigerian operators in relation to the award of oil blocks discussed above. Other than this, even though the operators are the entities obligated to carry out most of the actions under the Act, the discriminatory treatment appears to be against foreign goods and service providers, hence, only the suppliers of foreign goods and services would have a right to claim for a breach of the national treatment obligations under the various BITs considered in this research in connection with Nigerian Local Content Instruments. 4.10 Conclusion
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There is no gainsaying that the NOGOIkCD Act 2010 has negative consequences on existing Nigerian Legislations and Nigerian Bilateral Investment Treaties (BIT).The overall impact of the Act is that it impinged on Nigerias National Treatment Obligation under international law as can be gleaned from the Nigerian BITs surveyed in this chapter. It also undermined the previous Nigerian enactments relating to Foreign Direct Investment (FDI). Other adverse effect of the NOGICD Act 2010 is the creation of duplication of functions among rival government agencies undertaking the same subject matter. The Act also engendered inefficiency, power tussle and low productivity in the Nations Oil and Gas Sector. The Principal Nigerias enactment badly affected by the NOGICD Act include the 1999 Constitution of the Federal Republic of Nigeria (as amended), which is the fons et origo of Nigerias Law, the Companies and Allied Matters Act, the NOTAP, the Petroleum Act, the Nigerian Investment Promotion Commission Act, among others.
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Ok
Chapter Five The Antithesis of NOGICD Act with Global Trade and Investment Law 5. Introduction Notwithstanding the impairment of Nigerias existing legislations and treaties, the NOGICD Act, 2010, also has adverse consequences on international trade law and global investment norms. This chapter shall, therefore, be committed to analyzing the global trade laws and the effects of the NOGICD Act on such international trade regulations. Emphasis in this regard, shall be focused on WTO GATS, GATT, TRIMS, quantitative restriction, as well as market access barriers created by the NOGICD Act.5.1 The NOGICD Act and General Agreement on Trade in Services (GATS), 1994 Article XVII.1of GATS , 1994, provides for national treatment under GATS as follows: "In the sectors inscribed in its schedule , and subject to any conditions and qualifications set out therein, each member shall accord to services and service suppliers of any other member, in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and service suppliers". Under GATS arrangements, the national treatment obligations of each country are determined by the commitments made in its country schedules. 202 Such commitments may be subject to conditions and qualifications determined by the relevant country. These conditions are expected to be progressively enlarged through further negotiations. 202 Article XX. 1 of GATS .
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Table 5.1 Below is the schedule oOfk Nigeria's specific commitments to GATS 1994
Coding
Sector or subsector
Limitations on Limitation market access national
treatment
I. HORIZONTAL COMMITMENTS
ALL
SECTORS
INCLUDED IN THIS
SCHEDULE
Commercial Presence
3) Commercial
presence requires
that
foreign
service providers
incorporate or
establish
the
business locally in
accordance with
the
relevant
provisions
of
Nigerian Laws
and
where
applicable
,
regulations
particularly with
respect to land
and
building
acquisition, lease
rental etc. This
requirement
operates on a non-
discriminatory
basis.
Foreign
enterprises with
investment
in
Nigeria have the
same rights and
responsibilities as
domestic
enterprises, and
could
transfer
abroad
their
profits
in
accordance with
the
existing
regulations.
on Additional commitme nts
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Presence of Natural Persons
4) UOnk bound,
except
for
measures
concerning
entry
and
temporary stay
of personnel
employed in
senior
management
and experts
jobs for the
implementation
of
foreign
investment.
Their
employment
shall be agreed
upon by the
service
providers and
approved by
the IDCC
4) Unbound,
except
for
measures
concerning the
categories of
natural persons
referred to in the
market access
column
II. SECTOR ­ SPECIFIC COMMITMENTS
7521 7522 7523 7521 7521 7523
2 COMMUNICATION SERVICES
C. Telecommunication services
Sale/installation
of 1), 2) 3), 4) None 1), 2) 3), 4) None
terminal equipment
1), 2), Not 1),
2),
Not
Operating pay phone
applicable
applicable
Mobile communications 3), 4) None
­ cellular , paging etc
(voice and data)
1), 2) Unbound
Value added services
3), 4) None
3), 4) None 1), 2) Unbound 3), 4) None
7523
1), 2), 3) 4) None 1), 2), 3) 4) None
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6. FINANCIAL SERVICES Ok
B. Banking And Other
Financial
Services
excluding Securities and
Insurance
81115-9 8113
a) Acceptance of deposits and other repayable funds from the public
b) Lending of all types
including
mortgage
credit, factoring and
financing of commercial
transactions
c) Guarantees and commitments
d) Financial leasing
1) Subject to a maximum of 40 per cent equity participation 2) Unbound with the exception of ,,C "guarantees and commitments" 3) Companies must be incorporated in Nigeria
1) Composition of the Board should reflect the ownership structure
2) Unbound with the
exception of "C"
"guarantees
and
commitments"
e) All payment s and
money
transmission,
services,
including
credit, payment and
similar card, Travellers
cheques and cheques
4) Unbound
3) None 4) Unbound
81199
8112 81339 81339 81333 81321
f) Trading for account of Customers
-
Money
instruments
market
- Foreign exchange
- transferable security
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81339 -other
negotiable
Ok
81323
instruments
g) Asset management
81339
h) settlement and
clearing services for
financial
assets
(excluding securities)
8131
i) provision and transfer of financial information and financial data
9. TOURISM AND
TRAVEL
RELATED
SERVICES A ­ D
641-643
7471
7472
11.
TRANSPORT
SERVICES
A. Maritime Transport Services
1) Unbound
b) Foreign transportation
b) Unbound: Access to cargo is subject to the provisions of the National Shipping Policy Decree No. 1 of 1987
- at least 40 percent of Liner Cargo is reserved for national carriers
-100 percent of government cargo is reserved for national carriers
-50 percent of bulk trade (dry/wet) is reserved for national carriers
- 50 percent of cargo generated through technical
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7213 8868
assistanOcke or international aid is reserved for ships owned or hired by national carriers.
`
2) None
3) None (provided ship-
owners
representative
complies with relevant laws
of establishing business in
Nigeria
2) None 3) None
4) Unbound
4) Unbound
c) Rental vessels with crew
1) Unbound 2) None
1) Unbound 2) None
3) Unbound
d) Maintenance and repair of vessels
e) Rail Services
Transport
4) Unbound 1) Unbound 2) Bound
d) Maintenance and repair of rail transport equipment
3) None 4) Unbound
3) Unbound 4) Unbound 1) Unbound 2) Bound 3) None 4) Unbound
8868 1), 2) Unbound 3), 4) None Source: NIGERIA ­ SCHEDULE OF SPECIFIC COMMITMENTS
1), 2) Unbound 3), 4) None
Nigerias schedule of commitment as indicated in the above table includes commitments in relation to four sectors and 28 subsectors namely, telecommunications, financial, tourism and travel related services and transportation services. Nigerias national treatment commitments in relation to financial services and transportation, areas in which services are provided in the
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Nigerian oil and gas industry, are theOkonly ones likely to be impacted by the Nigerian content provisions. In other to arrive at the above conclusion, the nature of National Treatment Obligation and the test of National Treatment Obligation shall be analyzed and juxtaposed with the relevant provisions of the NOGICD Act 2010. 5.1.1Evolution of National Treatment and the Duty of Host States to Foreign Investors Before World War I Before the advent of Russian Revolution of 1917 and the Mexican Agrarian Revolution of the same year, it seems, albeit some dissenting opinions, to have been accepted among the world powers that a state that took an aliens property was obligated to make prompt and adequate compensation. It was not clear whether this understanding was derived from a general principle of law for instance the Declaration of the Rights of Man and the Citizen of 1789203 or was unique to international law. The understanding tended to synchronize with the principle that aliens are entitled, with respect to their property, to at least equality of treatment with nationals of the taking state (underline for emphasis). Since virtually every nation recognized the right of private property and the duty of the state to compensate an owner of property taken for public use, the property of foreign investors generally would be protected by a national treatment standard (emphasis added). The actual incidence of state taking in peace-time was rare, and the legal literature sparse. A later commentator wrote, ,,It is probable that textwriters have given little attention to the status of the private property of aliens in time of peace because the inviolability of such property was so generally recognized.204
203 Article 17 of the Declaration States: Property being an inviolable and sacred right, no one may be deprived of his property except when public necessity, lawfully established, so requires, and on condition of just and prior compensation. 204 P. John Bullington, Problems of International Law in the Mexican Constitution of 1917, 21 American Intl 685, at 695 (1927).
Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 137 Ok Elihu Root, the leading American International Lawyer in the first quarter of the twentieth century (as well as former Secretary of War and Secretary of State), wrote in 1910: "There is a standard of justice, very simple, very fundamental, and of such general acceptance by all civilized countries as to form a part of the international law of the world. The condition upon which any country is entitled to measure the justice due from it to an alien by the justice which it accords to its own citizens is that its system of law and administration shall conform to this general standard. If any countrys system of law does not conform to that standard, although the people of the country may be content or compelled to live under it, no other country can be compelled to accept it as furnishing a satisfactory measure of treatment to its citizens".205 Thus Root, in his opening presidential address to the annual meeting of the American Society of International Law, laid down the principle of national treatment and its relation to a minimum treatment standard, but not focused particularly on protection of property. 5.1.2 The Russian Revolution and Repudiation of Private Property In October 1917, the Communist Party took control of the government of Russia, and over the next few years consolidated its hold in what became the Soviet Union, stretching from Poland on the west to the Pacific Ocean in the Far East. By Decree of 26 October 1917, private ownership of land was abolished without any provision for compensation. A few months later, all banks were nationalized and their assets and liabilities consolidated in a new State Bank. Within the following two years, ownership of mines, factories, the oil industry, and eventually all industry was transferred to the state, and the public debt was repudiated. No compensation was provided in any of the measures of 205 Elihu Root, "The Basis of Protection to Citizens Residing Abroad", 4 American J. Intl L. 517, 521 ­ 522 (1910).
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nationalization, and no distinction wasOkmade between property owned by Russian nationals and foreign-owned property. The Western Powers protested, asserting in a formal declaration ,,that they view the decrees relating to the repudiation of Russian State loans, the confiscation of property and other similar measures as null and void in so far as their nationals are concerned.206Over the next several years, discussions and conferences were held from time to time with the Western Powers concerning claims against Russia and counterclaims by Russia resulting from intervention in the civil war, essentially without result. The Western nations never formally accepted the Soviet position as legal, but gradually came to terms with the ,,facts on the ground. Even the United States, which had refused to extend recognition to the Soviet Union until 1933, made a kind of claims settlement with the USSR in that year the so-called Litvinov Assignment.207 5.1.3 The Mexican Revolution and the Social Function of Property Until 1910, Mexico was governed under constitutions and civil codes emphasizing individualism and the right to own property. Under the Civil Code of 1884, issued during the reign of Prfirio Diaz (1876 ­ 1911), a land-owner owned not only the surface, but the subsoil as well, including oil and mineral deposits. The revolution against Diaz, sparked by a combination of landless peasants and liberal intellectuals, continued for a decade, with a succession of leaders and onand-off intervention by the United States. In 1917, a new Constitution was promulgated, containing a new, revolutionary approach to property. Article 27 of the Constitution of 1917 (still in effect) reads: "Ownership of the lands and materials included within the boundaries of national territory belongs originally to the Nation, which has had and continues
206 Declaration of the US Ambassador to Russia, 13 Feb. 1918, on behalf of the 14 Allied Powers and 6 neutrals. 207 Dept. of State, USA, Establishment of Diplomatic Relations with the Union of Soviet Socialist Republics, East European Series No. 1, 1933.
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to have the right to transmit owneOrkship thereof to private parties, thereby constituting private property. Expropriations may only be made for reasons of public utility and by means of compensation. The nation shall have at all times the right to impose on private property the modalities required by the public interest, as well as the right to regulate the exploitation of natural resources capable of appropriation in order to conserve them and to make an equitable distribution of the public wealth." For Mexico, and other countries of Latin America, the social function of property did not mean expropriation without compensation. But it meant distinctions between state-taking of a private home where a school or high-way was to be built, and state ownership (or acquisition of ownership) of a major industry, such as electric power generation, petroleum exploration, or railroads. For the former, compensation, generally prior and more or less in full value, was contemplated, if not always implemented. For the latter, as well as for redistrict ion of land pursuant to agrarian reform programmes, compensation was not excluded, but it need not be prior or prompt, and the states ability to pay was an important factor in determining the appropriate level of compensation. As for the rights of foreign investors, many of the Latin American countries, including Mexico, invoked the writings of the nineteenth century Argentine jurist Carlos Calvo, who had taken the position that under international law aliens had no rights greater than citizens of the host country. 5.1.4 Carlos Calvo Doctrine The frequency of home states use of military force to protect citizens investments overseas led to rising resentment among host states. While the DragoPorter Treaty eventually outlawed the use of force for investment protection,208one of the challenges to hoed state involvement in their citizens foreign activities was more fundamental than the complaint about methods of protection. Argentine 208 Hague Convention II, Limitation of Employment of Force for Recovery of Contract Debts (Drago Porter Treaty), Oct. 18, 1907, art 1 (1).
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scholar Carlos Calvo wrote in 1868 tOhkat the treatment owed foreign investors should be one of pure national treatment. The treatment a foreign investor should receive, Calvo argued, should be the same treatment as the treatment the host offers its own citizens property, no matter what the level of protection. Calvo added that home states should not be able to interfere in another states treatment of its nationals, and that foreign investors like national investors should be limited to national courts when in search of remedies. International law, in short, would be substantially removed from investment law. The investment law debates regarding Calvos ideas only began after 1918.209 The reason is because this was the year in which the Bolshevik leaders of the Russian Revolution proclaimed the triumph of communist ideas about property namely, that there should be no protection of private property. The international legal implications of Lenins abolishment of private property were particularly strong for the contemporary law of international investment protection, because the principle of national treatment no longer offered foreign investors an assured standard of protection. Indeed, Soviet Russias defence of its expropriations of foreign properties on the basis of national treatment was adopted by other hosts, quickly dividing world opinion on the level of investor protection required by international law. In what would become the forerunner to a line of arguments put forward throughout the 20th century by various host state governments around the world, Mexicos revolutionary governments of the 1920s relied on national treatment a la Calvo. In the Harry Roberts case (1926), the national doctrine was put to the test in a human rights context: Harry Roberts, a US citizen, was arrested for murder in Mexico and held by the Mexican police for 19 months. Delays in the prosecution of Roberts were noted by the Mexican government (admittedly unconstitutional under the then-constitution of Mexico), but no action was taken. While in prison, Roberts 209 Krista Nadakavukaren Scheffer, International Investment Law: Text, Cases and Materials, Edward Elgar Publishing Limited, 2013, p. 6.
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was also subjected to "rude and cruOelk treatment". The tribunal reasoned that ,,Aliens of course are obliged to submit to proceedings properly instituted against them in conformity with local laws. 210Because Mexico had ample grounds to suspect Roberts guilt, the arrest itself was not illegal. The second question, however, was whether he had been treated legally. Here, Mexico argued that as Roberts was treated no differently than Mexican prisoners, the government should not be found responsible for violating any norms of treatment. The commission, however, made the following remark "...such quality is not the ultimate test of the propriety of acts of authorities in light of international law. The test is, broadly speaking, whether aliens are treated in accordance with ordinary standards of civilization". A minimum standard not the national treatment principle was the measure of Mexicos acts, and on this measure, the government had failed. Soon the debate over minimum standards/national treatment reached international investment law. When Mexico nationalized US oil investments in 1938, US Secretary of State Cordon Hull wrote a diplomatic note acknowledging the Mexican right to expropriate, but stating that any expropriation must be accompanied by "prompt, adequate, and effective" compensation.211The so-called ,,Hull Formula, still the widely used measure of compensation, encapsulated the idea of a minimum standard; hosts must at least protect investors to the extent that expropriations are compensated fully, whether or not citizens have such a right. Discussions as to whether the minimum standard or pure national treatment was the correct standard to grant investors continued for several decades but it was not until the early post World War II years that the investment debates became significant again. The general thrust of the arguments was clear: the right to compensation for expropriations was asserted by the commercially dominant European governments and the United States against the insistence of new states, created out of the wave of de-colonization, on their sovereign right to expropriate
210 Harry Roberts (USA) v. United Mexican States, Decision of 2 November 1926, 4 RIAA 77, 79 , p.6. 211 Green Hackworth, 3 Digest of International Law,1942, pp.658 - 659.
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without offering the foreign investors pOakyments at least full payments for the value of their properties. The reasoning behind the denial of a minimum standard of protection was less theoretical than practical. With much of the natural resource wealth in the newly independent countries owned by private companies from the former colonial mother, the new governments were left with few possibilities to finance themselves. Using the concept of permanent sovereignty over natural resources, the governments thus asserted their rights to such properties and denied the prerequisite of compensation. 5.1.5 The Havana Charter In the first draft of the Havana Charter for the International Trade Organization, submitted by the United States in 1946, no provision at all was included concerning international investment. As the principal American negotiator wrote, "It was feared that investment provisions negotiated at a multilateral conference might express the lowest common denominator of protection to which any of the participants would be willing to agree". When a chapter on economic development was added to the American proposals, the subject of international investment could no longer be avoided, but the draft that eventually emerged seems to have pleased no one. The Havana Charter, signed in March 1948 on behalf of 53 countries, provided (in Article ll(l)(b)) that no member shall take unreasonable or unjustifiable action within its territory injurious to the rights or interests of nationals of other Members in the enterprise, skills, capital, arts or technology which they have supplied (emphasis supplied). Article 12, entitled "International Investment for Economic Development and Reconstruction", stated that Members recognize that:
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"International investment, both puObklic and private, can be of great value in promoting economic development and reconstruction and consequent social progress"; and further, that: "The international flow of capital will be stimulated to the extent that Members afford nationals of other countries opportunities for investment and security for existing and future investments". But the draft went on to provide that: "A member has the right to determine whether and to what extent and upon what terms it will allow future foreign investment; to prescribe and give effect on just terms to requirements as to the ownership of - existing and future investments; and finally" Members therefore undertake to give due regard to the desirability of avoiding discrimination as between foreign investments. A provision requiring member states to make just compensation for property taken into public ownership, subject to various exceptions, was dropped from the final version as adopted at Havana. The Charter itself was abandoned by the United States in 1950, and thereafter by all the other signatories, mostly for reasons unrelated to the investment articles. It is fair to say, however, that even without participation of the Soviet Union, or of the many states that gained their independence only in the 1960s, no real consensus had developed around the subject of international investment, and that there was no disposition to craft legal rules, as contrasted with phrases such as members undertake to give due regard. 5.1.6 Permanent Sovereignty over Natural Resources (1962) After ten years of debate in the UN Human Rights Commission, the Economic and Social Council, and a Special Commission on Permanent Sovereignty over Natural Resources, the UN General Assembly came in the fall of
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1962 to consider a proposed DeclaratioOnk on Permanent Sovereignty over Natural Resources. Though a resolution of the General Assembly, even in the form of a Declaration, is not positive law and does not come before parliaments for ratification, the proposed Declaration was seen at the time as an attempt to record and perhaps to shape the customary law then prevailing. The debate reflected much of the world's division on the question of foreign investment, and the outcome remained ambiguous. As the draft was introduced upon recommendation of the Special Commission, it contained a series of recitals of sovereign rights, and only vague references to international law. The United States, supported by the United Kingdom, sought to balance the draft with statements concerning the obligations of states under international law. The draft resolution did speak of compensation for nationalization or expropriation, but said only that: "The owner shall be paid appropriate compensation, in accordance with the rules in force in the state taking such measures in the exercise of its sovereignty and in accordance with international law".212 The United States proposed an amendment to the effect that 'appropriate compensation in accordance with international law means 'prompt, adequate and effective compensation'. But this amendment, in various versions, did not win favour, and was eventually withdrawn so that the quoted sentence remained as introduced. For the record, the American ambassador stated that his delegation: "was confident that the expression 'appropriate compensation' in operative paragraph 14 of the draft resolution would be interpreted as meaning, under international prompt, adequate and effective compensation".213 Not everyone agreed with this interpretation, but a Soviet amendment that I have, read:
212 Green H. Hackworth, Digest of International Law, Vol. III, p. 655 ­ 661 (US Dept of State 1942). 213 US Secretary of State to Mexican Ambassador to the United States, 21 July 1938.
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The question of compensation to thOek owners shall in such cases be (decided in accordance with the national law of the country taking these measures in the exercise of its sovereignty) defeated with 39 votes against, 28 in favour, and 21 abstentions.214 Furthermore, the draft resolution provided that: "In cases where capital is imported pursuant to authorization by the host state, the capital imported and the earnings on that capital shall be governed by the terms thereof, by national legislation in force, and by international law."215 The United States proposed an amendment that would expressly state that investment agreements shall be faithfully observed. That amendment was not approved, but came back in a modified form, as set out below. Meanwhile the United States and other home countries of investors could draw comfort from rejection of an amendment sponsored by Afghanistan and the United Arab Republic to the effect that: "The owner shall be paid adequate compensation, when and where appropriate. In the event, the resolution as proposed, and as adopted, read 'the Owner shall be paid appropriate compensation' making it plain, in the United states' view, that the payment of appropriate compensation was a matter of discretion but of obligation." 216 On the question of dispute settlement, the draft as proposed by the Special Commission provided that: "In any case where the question of compensation gives rise to a controversy, national jurisdiction should be resorted to. Upon agreement by the parties 214 Green H. Hackworth, Compensation for American-Owned Lands Expropriation in Mexico, Dept of State Publ. 1288, Inter American Series 16 (1939). 215 Soviet Union Draft Amendment to the UN Resolution on Permanent Sovereignty over natural Resources of 1962 as captured by M. Stephen Schwebel, The Story of the UNs Declaration on Permanent Sovereignty over Natural Resources, 49 ABA Journal 463, 1963. See also N. Karol Gess, Permanent Sovereignty over Natural Resources, 13 Intl and Comp. L.Q 398, 1964. 216 See M. Stephen Schwebel, The Story of the UNs Declaration on Permanent Sovereignty over Natural Resources, 49 ABA Journal 463, 1963.
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concerned, settlement of the disOpkute may be made through arbitration or international adjudication (emphasis added)".217 The United States sought an amendment that would preclude an interpretation that resort to national jurisdiction could be avoided only by an agreement entered into after the dispute had arisen. That amendment also failed, but 'may' was changed to 'should', and the sentence beginning with 'upon agreement' was changed in the final version to read: "Upon agreement by sovereign states and other parties concerned". Considering developments not much later in another forum, it is interesting to recall the debate on the US-UK amendment to add: Agreements freely entered into shall be faithfully observed. The American ambassador said that this 'generally accepted principle applies alike to agreements between states, states and international organizations and states and private foreign investors'. Other states took the position that agreements between a government and a company, whether foreign or domestic, could not be equated with agreements between governments, and were subject only to national law. On this issue the US-UK position prevailed, though not by mentioning foreign investors expressly, but by providing (in a new Article 8) that 'Foreign Investment Agreements freely entered into by or between sovereign States shall be observed in good faith'. The American ambassador sought to nail down the point: My delegation is especially gratified that this Committee has affirmed the binding character of foreign investment agreements, whether these agreements are for arbitration of disputes or are of a more comprehensive character, and whether these agreements are concluded between states, or between states and international organizations, or states and private foreign investors.218
217 Emphasis supplied. 218 This summary is adapted from N. Karol Gess, ,,Permanent Sovereignty over Natural Resources , 13 Intl and Comp. L.Q 398, 1964.
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One might have wondered, at the endO,kwhether the United States would vote for or against Resolution 1803. In the event, after some debate within the US government, the United States joined 86 other states in voting in favour. The US delegation concluded that the United States gained from the provision that foreign capital shall be governed by the terms of its importation and by international law, meaning, as it believed, that the resolution incorporated by reference the requirement of international law that foreign capital shall riot be subjected to discriminatory treatment. Also, it appreciated the provisions in the resolution as adopted that taking of private property must be for a public purpose, and that profits derived from the investment 'must be shared in the proportions freely agreed upon between the investor and the recipient State. There is no question that Resolution 1803 was ambiguous, and that different interests could cite different provisions to their own purposes. President Allende of Chile, for instance, addressing the United Nations in 1972 shortly after his government had expropriated the interests of US-owned copper companies, essentially without compensation, quoted only from the first preambular clause of the Declaration, concerning the 'inalienable right of all states freely to dispose of their natural wealth and resources in accordance with their national interests. Nevertheless, the Resolution on Permanent Sovereignty did constitute a consensus of sorts between developed and less developed countries, around four basic principles: That compensation must be paid in the event of taking of alien property; That such compensation must be paid in accordance with international law; That investment agreements between states and private parties have a binding effect; and That arbitration agreement between states and private parties have a binding effect.
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5.1.7 From Permanent Sovereignty to tOhke New International Economic Order The consensus (or apparent consensus) cobbled together in the context of Resolution 1803 did not last long, though the 1962 Declaration on Permanent Sovereignty has continued to be studied and quoted. But the idea that resolutions of the UN General Assembly especially if labelled 'Declaration' could make law caught on in the UN community, even as the many newly independent states were gaining ever larger majorities in the one nation-one vote bodies. Of course, technically the UN General Assembly has no power to make law. But if an existing norm for instance that expropriation of the property of aliens calls for compensation is based on customary law, it is at least arguable that a resolution denying the existence of that norm impairs its continuing validity." Soon after the "consensus' of 1962, a coalition of Second and Third World representatives to the United Nations set out to pursue this course. In November 1966, the General Assembly adopted another resolution entitled Permanent Sovereignty over Natural Resources, but with several tilts to the balance of Resolution 1803. Resolution 2158 recognized (in paragraph 5i). The right of all countries, and in particular of the developing countries, to secure and increase their share in the administration of enterprises which are fully or partly operated by foreign capital and to have a greater share in the advantages and profits derived therefrom on an equitable basis, with due regard to development needs and objectives of the peoples concerned and to mutually acceptable contractual practices, A total of 104 countries voted in favour of the resolution, six countries, including the United States, abstained. The US ambassador said that paragraph 5does not state with sufficient clarity the fact that no country can escape the obligations arising out of international law
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and economic cooperation and out of Ockontractual arrangements which have been mutually accepted.219 If the 1966 resolution lacked clarity, as the American delegate asserted, this could not be said about the next major Resolution on Permanent Sovereignty. In Resolution 3171, adopted in December 1973, the General Assembly affirmed: that the application of the principle of nationalization carried out by States, as an expression of their sovereignty in order to safeguard their natural resources, implies that each State is entitled to determine the amount of possible compensation and the mode of payment, and that any disputes which might arise should be settled in accordance with the national legislation of each State carrying out such measures. Nothing was stated about international law, and nothing was stated about international adjudication or arbitration. As for 'possible' compensation, it would be up to each state to determine the amount and mode of pavement. The resolution carried by 108 to 1, but this time with 16 abstentions, including ten Western European countries and the United States. In the following year the reign of the 'Group of 77 reached its high point, with the adoption of a Charter of Economic Rights and Duties or States, designed to describe (or bring about) a 'New International Economic Order'. Article 2 of the Charter shows the extent of departure from the traditional international law: Every State has and shall freely exercise full permanent sovereignty, including possession, use and disposal, over all its wealth, natural resources and economic activities. Each State has the right: To regulate and exercise authority over foreign investment within its national jurisdiction in accordance with its laws and regulations and in conformity with its
219 Statement of Ambassador James Roosevelt published in Press Release No. 4987 of US Delegation to the United Nations, 25 Nov. 1986, repr. in J. Henry Steiner, F. DetlevVagts, and Harold Hongju Koh, Transnational Legal Problems, 4th edition, 1994, pp.486 ­ 487.
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national objectives and priorities. No OSktate shall be compelled to grant preferential treatment to foreign investment; To regulate and supervise the activities of transnational corporations within its national jurisdiction and take measures to ensure that such activities comply with its laws, rules and regulations and conform with its economic and social policies. Transnational corporations shall not intervene in the internal affairs of a host State. Every State should, with full regard for its sovereign rights, co-operate with other States in the exercise of the right set forth in this subparagraph; To nationalize, expropriate or transfer ownership of foreign property in which case appropriate compensation should be paid by the State adopting such measures, taking into account its relevant laws and regulations and all circumstances that the State considers pertinent. In any case where the question of compensation gives rise to a controversy, it shall be settled under the domestic law of the nationalizing state and by its tribunals, unless it is freely and mutually agreed by all States concerned that other peaceful means be sought on the basis of the sovereign equality of States and in accordance with the principle of free choice of means.220 If this were really a statement of prevailing law lexlatain the language of international law most of what had come before would be gone. Not only would no state be compelled to grant preferential treatment to foreign investment a principle never incorporated as such into international law there seemed to be no right for foreign investment to equal treatment, i.e. no prohibition of arbitrary or discriminatory treatment of "foreign investments or investors". The right to nationalize or expropriate foreign-owned property long recognized was restated, but without any requirement of public purpose or public utility. And while "appropriate compensation" was mentioned, as in Resolution 1803 twelve years
220 Article 2 of the Charter on New International Economic Order.
Ok
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earlier, "shall" was changed to "shoulOdk", and "in accordance with international law" was omitted altogether.221 At minimum, the Charter of the Rights and Duties of States was a concerted effort by the developing countries to repudiate a system of law in whose creation they had played little or no part. Some writers, notably Garcia-Amador, who was the Reporter on State Responsibility to the International Law Commission and later Legal Adviser to the Organization of American States, thought that the Charter went further: The Third World attitude, the above scholar also asserted that at least insofar as measures affecting foreign-owned property are concerned, is to place State responsibility outside the realm of international law.222 Viewed more than a quarter century later, the Charter of the Rights and Duties of States seems less significant than it appeared at the time. If there was indeed an effort to divorce international investment from international law, that effort did not succeed, though appeals to "sovereignty" and other echoes of the debates of the 1960s and 1970s continued to be heard in the United Nations and other international fora. Nearly all the capital-exporting states either voted against the Charter or abstained, so that the consensus attributed to Resolution 1803 of 1962, and with decreasing persuasiveness to the intervening resolutions, could not be attributed to I trine charter. Notwithstanding the statements of several of its proponents designed to endow the New International Economic Order with the characteristic of law and to equate the resolutions with legislation, the challenge appeared essentially political.223
221 The final text of what became General Assembly Resolution 1803, 14 December 1962, is reproduced in both the Schwebel and Gess articles, cited in footnote 216, supra. 222 For the ,,legislative history of Resolution 3171, as well as of the Charter of Economic Rights and Duties of States, see F.V Garcia-Amador, ,,The Proposed New International Economic Order: A New Approach to the Law Governing Nationalization and Compensation, 12 Lawyer of the Americas 1, 1980. 223 The final vote on the Charter was 120 states in favour, 6 against, 6 against, and 10 abstentions. Negative votes were cast by the United States, the United Kingdom, the Federal Republic of Germany, plus Belgium, Denmark, Luxembourg, Austria, Canada, France, Ireland, Israel, Italy, Japan, the Netherlands, Norway, and Spain abstained. All other states that participated in the vote, including Australia, New Zealand, and Sweden, voted for the Charter.
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The United States and other homOek countries of multinational corporation rejected the challenge by the developing states, refused to agree to any change in the traditional principles, and denied that they had been replaced or modified in customary law by state practice (as contrasted with resolution of the United Nations). The capital-exporting states took the position that the traditional requirements are solidly based both on the moral rights, property owners and on the needs of an effective international system.224 Moreover, they argued, whatever objections might be made to the traditional rules as applied to investments established in the colonial era, the traditional rules should clearly apply to arrangements made between investors and independent governments negotiated on a commercial basis.225 The "traditional consensus" based on nineteenth-century attitudes concerning private property and on the practice of relatively few states, was drawn into question after World War I, particularly in the context of the Russian and Mexican revolutions. 226As national treatment no longer satisfied the defenders of private property and transnational investment, the basic principle was reformulated. The right of a state to nationalize or expropriate foreign-owned property was generally recognized, subject to the condition that the former owners receive compensation.227 The "Hull formula" calling for prompt, adequate, and effective compensation was not applied literally, even in the context where the formula was first
224 For a discussion of the formation of customary international law, including the conundrum in the assertion that law is built by state practice based on a sense of legal obligation, which in turn depends on the practice of states, see e.g. American Law Institute, Restatement, Third edition of the Foreign Relations Law of the United States, 102 and comments b and c and Reporters Note 2, 1987. 225 For a discussion of the formation of customary international law, including the conundrum in the assertion that law is built by state practice based on a sense of legal obligation, which in turn depends on the practice of states, see e.g. American Law Institute, Restatement, Third edition of the Foreign Relations Law of the United States, 102 and comments b and c and Reporters Note 2, 1987. 226 For a discussion of the formation of customary international law, including the conundrum in the assertion that law is built by state practice based on a sense of legal obligation, which in turn depends on the practice of states, see e.g. American Law Institute, Restatement, Third edition of the Foreign Relations Law of the United States, 102 and comments b and c and Reporters Note 2, 1987. 227 Emphasis added.
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enunciated. "Prompt" did not exclude Opkayments over time; 'adequate' was often not the equivalent of full value (putting aside how that term should be defined); "effective" meant that the taking state could not subject the compensation to taxation or exchange controls, but did not exclude more or less voluntary agreement by the former owner to reinvest some or all of the compensation in the taking state in sectors not designated for nationalization. Later formulations looked to "just compensation" or "appropriate compensation", taking account in some instances of the taking state's ability to pay. The views of the law of international investment were inevitably shaped by varied, and often ambivalent, attitudes to private investment generally, to sovereignty, to multinational enterprises, and to the role of the state in the economy. Efforts to reach international agreements on the law of international investment in GATT, in the United Nations and its organs, or elsewhere foundered, except for the 1962 Resolution on Permanent Sovereignty that contained something for everyone and reflected consensus, if at all, for a short time only.
5.2 Nature of the National Treatment Obligation of Article XVII.1 of the GATS As earlier mentioned, the National Treatment Obligation under GATS 1994 is limited to trade in services in the service sectors undertaking each WTO member country. The obligation applies only to a measure affecting trade in services to the extent that a WTO member has expressly committed herself to grant such treatment in respect of the specific services sector in service schedule. The said commitment is usually made subject to a certain conditions, qualifications and limitations, which are enumerated in schedule of each member country. The underlying philosophy behind the National Treatment Obligation of Article XVII of GATS 1994, is to ensure competitive equality. This was reiterated in The Panel in China ­ Electronic
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Payment Services228 where it was held Othkat the objective of the national treatment obligation of Article XVII: 1. Is to ensure equal competitive opportunities for like services and like service suppliers of other member countries. 5.2.1 Test for National Treatment Obligation under Article XVII.1 of the GATS The panel in EC-Bananas III 229 interpreted the applicable test of national treatment obligation as follows: "In order to establish a breach of national treatment obligation of Article XVII:1, three elements need to be demonstrated: (i) The EC has undertaken a commitment in a relevant sector and the mode of supply; (ii) EC. has adopted or applied a measure affecting the supply of services in that sector and/or mode of supply; and (iii) The measure accords to services or service suppliers of any other member treatment less favourably than that it accords to the ECs own like service suppliers". In the same vein, the panel in China ­ Publications and Audio-Visual Products230 and China ­ Electronic Payment Services231held in connection with article XVII.1 of the measures at issue as follows: Article XVII.1 of the GATS thus sets out a four-tier test of consistency with the national treatment obligation thereof. This test of consistency requires the examination of: a. Whether, and to what extent, a national treatment commitment was made in respect of the relevant services sector; b. Whether the measure at issue is a measure by a member affecting trade in services, i.e. a measure to which the GATS applies.
228 The Panel in China ­ Electronic Payment Services ,2012 , para. 7.700. 229 Panel Reports EC-Bananas III (1997) , para. 7.314. See also Panel Report EC-Bananas III (Article 21.5 ­ Ecuador ,1999, para.6.100. 230 See Panel Report, China ­ Publications and Audio-visual products , 2010 , para. 7.942 231 Panel Report, China-Measures Affecting Electronic Payment Services, 2012, WT/DS413/R, Adopted 31 August 2012.
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c. Whether the foreign and domesOtikc services or service suppliers are "like services" or "like service suppliers" and d. Whether the foreign services or service suppliers are accorded "treatment no less favourable". Applying the above test and criteria to the NOGICD Act, it can safely be deduced that the Act is in clear breach of Nigerias commitment to the GATS, 1994. A close observation of Table 5.1 (Supra) reveals that Nigeria made specific commitments in sectors such as telecommunication, transportation, tourism and travel, insurance and financial services. Unarguably, a careful community examination of tables 1.4, 1.5, and 1.7 of chapter three above, shows the high level of abuse of National Treatment Obligation by the NOGICD Act in relation to finance and insurance service, transportation, information and communication technology. The table established beyond doubt that Nigerian service providers in those sectors were accorded treatment more favourable than their foreign service suppliers counterparts. This is an infraction of Article XVII.1 of the GATS, 1994.
5.3 Breach of TRIMs Obligation by the NOGICD Act. TRIMS was negotiated during the Uruguay Round in recognition of the fact that a number of investment measures can have trade restrictive or distorting effects. It focuses only on investment measures that affect trade in goods.232 With regard to national treatment, Article 2(1 of TRIMS) provides that, "without prejudice to other rights and obligations under GATT 1994, no member shall apply any TRIM that is inconsistent with the provisions of Article III... of GATT 1994". TRIMs also provides an illustrative list of measures which are inconsistent with the national treatment obligations under Article III.4 of GATT 1994233in its Annex. These measures include:
232 Article 1 of TRIMs. 233 GATT 1994 refers to the General Agreement on Tariffs and Trade 1994 in Annex 1A to the WTO Agreement.
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"... those which are mandatory oOrkenforceable under domestic law or under administrative rulings, or compliance with which is necessary to obtain an advantage, and which require": (a) The purchase or use by an enterprise of product of domestic origin or from any domestic source, whether specified in terms of particular products, in terms of volume or value of products, or in terms of a proportion of volume or value of its local production. These provisions refer to local content obligations, which are thus prohibited by these rules. Developing country members such as Nigeria may deviate from the national treatment obligations to the extent and in such a manner as Article XVIII of GATT 1994 permit the member to deviate from the provisions of Article III of GATT 1994. Additionally, Article 3 states that all exceptions under GATT 1994 shall apply. These exceptions are mainly provided under Articles XX (General Exceptions) and Article XXI (Security Exceptions), the provisions of which do not appear to apply with respect to Nigerian content obligation. Section 12 of the NOGICD Act stipulates that all operators, enterprise and companies engaged in Oil and Gas business in Nigeria shall give first consideration to Nigeria made goods used in production of Oil and Gas in Nigeria. Accordingly, the aforementioned section is, for all intents and purposes, a derogation of Nigerias TRIMs obligation. Nigeria will therefore incur liability if a foreign investor through his or country refers the infringing section 12 of NOGICD Act to ICSID. A repeal of the above section is ultimately advocated.
5.4 Infraction of Quantitative Restriction Obligation by the NOGICD Act Quantitative Restriction refers to any measure or action taken by government of a state for purposes of limiting or restricting or outright embargo on importation or exportation of goods. Put in another way, Quantitative Restriction otherwise referred to as ,,QR is a measure which limits the quantity of a product that may be
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imported or exported. Such a prohibitOiokn may be absolute or conditional, when certain conditions are satisfied. It may also take the form of import or export quota, indicating the quantity that may be imported or exported. Members of WTO are required to notify the WTO Secretariat of any Quantitative Restriction which they maintain, and of any changes in such restrictions whenever they occur.234The notifications shall embody the following: a. A general description of the restriction; b. The type of restriction; c. The relevant tariff line code; d. A detailed product description; e. The WTO justification for the measure concerned; f. The national legal basis for the restriction; and g. Information on the administration of the restriction and, where relevant, an explanation of the modification of a previously notified restriction. There is no indication that Nigerian Government notified the WTO Secretariat regarding the Quantitative Restriction it adopted on fabricated and welded products in section 53 of NOGICD Act 2010. 5.4.1 General Prohibition on Quantitative Restrictions Article XI.1 of the GATT 1994, entitled "General Elimination of Quantitative Restriction", sets out a general prohibition on quantitative restrictions, whether on imports or exports. As the panel in Turkey ­ Textiles235stated: "The prohibition on the use of quantitative restrictions forms one of the cornerstones of the GATT system". Article XI.1 of GATT 1994, provides as follows: "No prohibitions or restrictions other than duties, taxes or other charges, whether made effective 234 See Council for Trade in Goods, Decision on Notification Procedures for Quantitative Restrictions. G/1/59/ Rev. 1, dated 3 July 2012, para, 1. 235 Appellate Body Report, Turkey ­ Restrictions on Imports of Textile and Clothing Products,1999, WT/DS34/AB/R, adopted 19 November 1999, DSR 1999; para 9.63.
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through quotas, import or export licensOesk or other measures, shall be instituted or maintained by any (member) on the importation of any product of the territory of any other (member) or on the exportation or sale for export of any product destined for the territory of any other (member)". The panel in Japan ­ Semi-Conductors236observed that the wording of Article XI.1 is comprehensive as: it applied to all measures instituted or maintained by a contracting party prohibiting or restricting the importation, exportation or sale for export of products other than measures that take the form of duties, taxes or other charges. The comprehensive nature of the scope of the prohibition on quantitative restrictions was demonstrated by the WTO panel to include: export quotas, 237 minimum import price requirements, 238 minimum export price requirements.239 5.4.2. Is Section 53 of NOGICD Act Consistent with Article XI:1 of GATT 1994? The answer to the above puzzle is in the negative. Section 53 NOGICD Act entitled "Prohibition of Importation of Welded Products" provides as follows: "As from the commencement of this Act, all operators, project promoters, contractors and any other entity engaged in the Nigerian oil and gas industry shall carry out all fabrication and welding activities in the country". A close observation and analysis of the aforementioned section reveals that it constitutes absolute prohibition of importation of fabricated and welded products such as manifold, thermoplastic pipes and products listed in table 3.1 of chapter
236 Panel Report, Japan ­ Semi-Conductors ,1988, para. 104. Emphasis added. See also Panel Report, India ­ Quantitative Restrictions, 1999, para. 5.129. The panel in this case further noted that: ,,the scope of the term "restriction" is also broad, as seen in its ordinary meaning, which is "a limitation on actions, a limiting condition or regulation". 237Appellate Body Reports, China ­ Measures Related to the Exportation of Various Raw Materials, WTO DS394/AB/R/WT/DS395/AB/R/WT/DS398/AB/R, adopted 22 February 2012. 238 See EEC ­ Minimum Import Prices, 1978. Note that, in this case, the minimum import price requirement was enforced with an import certificate and a security lodgment measure. 239 See Japan ­ Semi-Conductors ,1988; and China ­ Raw Materials,2012.
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three with 100% Nigerian content into ONkigeria. This sort of prohibition is outlawed under Article XI.1 of GATT 1994. It follows that section 53 above is inconsistent with Article XI.1 of GATT 1994. In the case of Brazil ­ Retreated Tyres 240 , the European Communities claimed, inter alia, that the importation of fines on the importation, marketing, transportation, storage, keeping and warehousing of imported retreated tyres was inconsistent with Article XI.1 of the GATT 1994. In addressing this claim, the panel considered whether these fines, imposed by Brazil as an enforcement measure of the import prohibition, constituted a restriction on importation within the meaning of Article XI.1. It is further submitted that all the products enumerated in table 1.1 of chapter three of this dissertation with 100% Nigerian content places outright prohibition of importation of such products into Nigeria. It can, therefore, be safely concluded that section 53 of NOGICD Act 2010 is an aberration to Article XI.1 of the GATT 1994. 5.4.3. Can Nigeria be exonerated by Article XVIII and XII of GATT 1994? Article XII of GATT deals with balance of payment while Article XVIII borders on safeguard measures in times of economic emergency of a state. Nigeria cannot be excused by the above exceptions as a developing country because the enactment of NOGICD Act was not predicated on any of the above exceptions. As can be seen in section 106 (the Interpretation Section), "Nigerian Content was defined to mean the quantum composite value added to or created in the Nigerian economy by a systematic development of capacity and capabilities through the deliberate utilization of Nigerian human, material resources and services in the Nigerian oil and gas industry". From the above interpretation, it is abundantly obvious that the purpose of NOGICD Act 2010 was not to correct Nigerias external monetary
240 Appellate Body Report, Brazil ­ Measures Affecting Imports of Retreated Tyres, WT/DS332/AB/R, adopted 17 December 2007, DSR 2007.
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position (Balance of payment B.O.P). ONkigeria cannot therefore, be exculpated by Articles XII and XVIII of GATT 1994.
5.5 Legal Effect of NOGICD Act on National Treatment Standard under GATT 1994 This subsection examines the impact of the NOGICD Act, 2010, on the National Treatment Obligation set out in Article III of the General Agreement on Tariffs and Trade (GATT, 1994). The concern of the researcher here is paragraph 5 of Article III of GATT, which outlaws Local Content Requirement for imported products. 241 The writer shall consider the nature and purpose of Article III of GATT Vis-а-vis the consistency or otherwise of the NOGICD Act with Article III of GATT. 5.5.1 Nature of the National Treatment Obligation of Article III of the GATT 1994. There are predominantly two issues that germinate from the nature of National Treatment Obligation under Article III of GATT, 1994. This include the issue of de jure and de facto discrimination 242 . The question relating to internal border measures is not the business of the researcher, as same has no direct bearing to the issue in controversy. 5.5.2 The Object and Purpose of the National Treatment Obligation Article III of the GATT 1994 aforesaid, prohibits the discrimination against imported products. Broadly speaking, it prohibits members of WTO from treating imported products less favourably than like domestic product upon the arrival of the imported products at the domestic market. In elucidating the purpose of Article III of GATT 1994, the Appellate Body in the case of Japan-Alcoholic Beverages
241 Local Content Requirement are internal quantitative regulations, which require that a specific amount or proportion of a product must be supplied from domestic sources. 242 Peter Van den Bossche and Werner Zdouc, The Law and Policy of the World Trade Organization: Text, Cases and Materials (Third Edition), Cambridge University Press,2014, p. 352.
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II 243 stated with respect to the purposOek of the national treatment obligation of Article III: The broad and fundamental purpose of Article III is to avoid protectionism in the application of internal tax and regulatory measures. More specially, the purpose of Article III is to ensure that internal measures should not be applied to imported or domestic products so as to afford protection to domestic production. To this end, Article III obliges Members of the WTO to provide equality of competitive conditions for imported products in relation to domestic products. Furthermore, in the case of Korea-Alcoholic Beverages244the Appellate Body identified the objectives of Article III as avoiding protectionism, requiring equality of competitive conditions and protecting expectations of equal competitive relationship. In case EC ­Asbestos245, the Appellate Body stated that the purpose of Article III is: To prevent members from applying internal taxes and regulations in a manner which affects the competitive relations, in marketplace, between the domestic and imported products involved, so as to afford protection to domestic production. As Article III not merely requires equality of competitive conditions between imported and domestic products, but also protect the expectations of equal competitive relationships; the actual trade effects of the measures at issue are not dispositive of the consistency with Article III. A measure can be found to be in consist with Article III even when the effect of the measure n the volume of imports is insignificant or even non-existent. Panel and scholars have affirmed that one of the main purpose of Article III is to guarantee that internal measure of WTO members do not undermine their commitments on tariffs under Article II. Nonetheless, it must be observed, that the Appellate Body stressed in Japan-
243 Appellate Body Report, Japan ­ Alcoholic Beverages II, 1996, the footnote of para.109. The Appellate Body refers to the following panel report: US-Section 337 Tariff Act (1989). Para.5.10; Panel Report, US-Superfund, 1987, para. 5.1.9; Panel Report, Italy Agriculture Machinery, 1958, para. 11. 244 Appellate Body Report, Korea-Alcoholic Beverages, 1999, para. 120. See also Appellate Body Report, Canada ­ Periodicals, 1997, para.464. 245 Appellate Body Report, EC-Asbestos, 2001, para.98, original emphasis.
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Alcoholic Beverages II that the purposOek of Article III is broader. The Appellate Body stated: The sheltering scope of Article III is not limited to products that are the subject of tariff concessions under Article II. The Article III national treatment obligation is a general prohibition on the use of internal taxes and other internal regulatory measures so as to afford protection to domestic production. This obligation clearly extends also to products not bound under Article II. 5.5.3 Breach of Article III of the GATT, 1994 by the NOGICD Act The relevant sections and provisions of the NOGICD Act are sections 10(1)(a), 12 and the schedule to the Act. Section 10(1)(a) provides as follows: 10 (1)"A Nigerian Content Plan to be submitted to the board by all operators or aliens partners shall contain provisions intended to ensure that: (a) First consideration shall be given to services provided from within Nigeria and to goods manufactured in Nigeria (underlined for emphasis). Similarly, section 12 of the NOGICD Act stipulates as follows: 12. Subject to section 7 of this Act, the Nigerian Content Plan submitted to the Board by an operator shall contain a detailed plan, satisfactory to the Board, setting out how the operator and their contractors will give first consideration to Nigerian goods and services, including specific examples showing how first consideration is considered and assess by the operator in its evaluation or bids for goods and services required by the project (under for emphasis). In the same vein, table 1.1 of chapter three of this research setout preferential treatment for locally manufactured goods in Nigeria. From the above provisions of the NOGICD Act, it is not difficult to conclude that the regulatory measure adopted by the NOGICD Act is discriminatory against foreign made products in favour of Nigerian made goods. It follows that the Act undermined and breeched Nigerian National Treatment Obligation under Article III of GATT, 1994. The element of discrimination here is the requirement of "first
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consideration" to be accorded to NigeriaOnkmade goods in preference to like foreign made products in the Nations Oil and Gas Industry. Nigeria will, therefore, incur liability if WTO members whose products are discriminated against refer the matter to WTO Dispute Settlement Body (DSB).
5.6 Inconsistency of NOGICD Act with Foreign Investment Regulations The Nigerian Oil and Gas Industry Content Development Act also has adverse consequences on other foreign investment regulations. Notable among such foreign investment regulations includes the International Chamber of Commerce Guidelines on Foreign Direct Investment, the World Bank Guidelines on FDI and the UNCTAD Guidelines on Foreign Direct Investment. This subsection shall, therefore, analyze the relevant provisions of the foregoing International Investment norms vis-а-vis the NOGICD Act, 2010. 5.6.1 Invasion of UNCTAD Guidelines on FDI 2012 Article III (3) (b) of UNCTAD Guidelines on FDI 2012 provides as follows: each state shall not enact legislation and regulations which shall accord discriminatory treatment against foreign investors on grounds of nationality. Article III (2) of the same Guideline provides thus: each state will extend to investments established in its territory by nationals of any other state fair and equitable treatment according to the standards recommended in these Guidelines.246 It is beyond controversy that sections 3, 10, 11, 12 and the schedules to the NOGICD Act, 2010, made varying discriminatory provisions against foreign investors in the nations oil and gas industry contrary to the above enumerated UNCTAD Guidelines. Nigerian investors were given undue advantages against their foreign counterparts and this undermines the policy objectives of UNCTAD on FDI. 246 UNCTAD Guidelines on the Treatment of Foreign Direct Investment (2012), Accessible Act http://investmentpolicyhub.unctad.org, accessed on 20th March, 2017.
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5.6.2 Impairment of ICC GuideliOnkes on FDI 2012 The ICC Guidelines on International Investment rolled out in 2012 in paragraph (3) of chapter one on Investment Policies which obliges government of the host country not to discriminate against foreign investors in its rules and regulations and not to accord special treatment to local investors. Chapter two of the Guideline, dealing on ownership and management provides in paragraph (3) thereof as follows: "3b. The government of the host country should recognize that joint ventures are much more likely to be successful if they are entered into voluntarily and if the terms of the contracts are left to the free negotiation of the parties. There may be cases when investments that deserve high priority are only feasible on the basis of total foreign ownership... 3d. Should rely on economic, fiscal and commercial policy measures applying to all business operations, national and foreign, for the exercise of controls in the public interest rather than seek to do this through compulsory governmental participation in the equity or management of enterprises. 3e. Consistent with international treaty obligations, should liberalize and generally permit the delivery of services relating to investment by foreign service providers. 3f. Should respect well-established international rules and practices for the use of performance requirements relating to foreign investment, including those requiring local content, equity caps, technology transfer, domestic sales limitations, and the mandatory use of indigenous technology... 3h. Should encourage non-equity modes of production and development arising from contractual arrangements such as franchising, licensing, management, and outsourcing contracts.
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3i. Should not discriminate in governOmk ent procurement or in other government measures or actions in favour of state-owned or other domestic enterprises over foreign investors".247 Applying the provisions of the NOGICD Act to the above ICC Guidelines, it is obvious that the Act is inconsistent with the ICC Guidelines particularly as it relates to discrimination against foreign investors and the requirements of equity participation. Section 106 of the NOGICD Act of 2010 mandatorily provides that every foreign firm incorporated in Nigeria must have 51% equity shares being held by Nigerians. 5.6.3 Breach of World Bank Guidelines on FDI, 1992 Paragraph (2) of chapter three of World Bank Guidelines on FDI states as follows: "2. Each state will extend to investments established in its territory by nationals of any other states fair and equitable treatment according to the standards recommended in these Guidelines.248 It is submitted that a regulation like the NOGICD Act, which accords preferential treatment to national investors to the detriment of foreign investors in similar undertakings is neither fair or equitable, as this suggests equal treatment to both foreign and local investors.
5.7Conclusion It can easily be concluded from the above analysis that the NOGICD Act is inconsistent with Nigerias Obligation under: a.GATS, 1994; 247 Geoffrey Gamble and James Baachus, ICC Guidelines for International Investment (2012). Accessible at www.iccwbo.org.accessed on 20th March, 2017. 248 World Bank Group "Guidelines on the Treatment of Foreign Direct Investments", Legal Framework for the Treatment of Foreign Investment: Volume II: Guidelines (Washington, D.C.: The International Bank for Reconstruction and Development/THE WORLD BANK),1992,pp. 35-44.
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b.TRIMS Agreement, 1994;
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c.Quantitative Restriction;
e.National Treatment Obligation under Article III of GATT, 1994;
f.ICC Guidelines on International Investment;g. UNCTAD Guidelines on FDI;
h.World Bank Guidelines on the treatment of FDI.
The researcher also uncovered that Nigeria cannot be absolved by Article XVIII
and XI of GATT 1994 dealing on economic emergency and balance of payment.
The security exception in Article XX and XXI cannot also exonerate Nigeria, as
the purpose of the NOGICD Act is not anchored on security imperative.
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Chapter 6 Conclusion and Recommendations 6.1 Conclusion 1Nigerian parliament and, indeed, the world at large, are expected to find this dissertation a useful companion and hand book in the task of amending and/or reviewing the Local Content Act. The research shall provide guidance to the legislature in passing future enactments devoid of antagonism with Nigerias international obligations. 2The executive arm of government, particularly the Ministry of Foreign Affairs, and other agencies of government involved in the business of foreign policy formulation shall rely on this work as an authority while initiating policies to bring them in tandem with Nigerias foreign policy objectives. The centerpiece of Nigerias foreign policy is respect for international law, equal treatment of all persons without discrimination and international cooperation. 3Learned scholars engaged in the teaching of international law and students of international law shall depend on this work as an encyclopedia of the relationship between WTO Law and domestic legislations. Under international jurisprudence, municipal law cannot be invoked to paralyze international obligation of states. 4Nigerian courts and other international tribunals shall have recourse to this research as a panacea for resolving conflict between municipal and international law.
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5Research institutions in NigeriOakand across the globe shall resort to this work on questions of law relating to oil and gas industry. In particular, the Nigerian Institute of Legislative Studies, the Nigerian Institute of International Affairs and the Nigerian Institute of Advanced Legal Studies will make references to this research while propounding law reforms to be undertaken in the oil and gas sector. 6Restriction of trade stunts and hurts economic growth and development. Implementation of this research will end importation of refined petroleum product into Nigeria and make Nigeria self-sufficient in petroleum product. 7Transfer of technology is guaranteed upon adoption of this research. 8Trade dispute would be eliminated with the application of the findings of this research. 9 Unemployment rate would be drastically reduced if this research is religiously implemented. 10Corruption is the bane of Nigeria Oil and Gas Industry. (11)Privatization is a panacea for growth and effective management of the nations oil and gas sector. (12)The NOGICD Act is antithetical to FDI (13)The NOGICD Act encourages duplication of functions and power tussle in the nations oil and gas industry. (14)The NOGICD Act is inconsistent with several existing Nigerian legislations. (15)The NOGICD Act has adverse consequences on global trade and investment laws. (16) The neglect of oil producing communities of the Niger Delta Region is the cause of militancy and existence of illegal oil refineries in the region.
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6.2 Recommendations
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A wide range of recommendations have been proffered in this research to usher
in the needed growth and development, and sanitize the Nigerian Oil and Gas
sector. It is hoped that the implementation of the underlisted far reaching
recommendations will transform the nations oil and gas industry for optimal
performance and economic prosperity.
6.2.1 Scrapping of the NNPC Scraping of the NNPC and transfer of its functions to the Ministry of Petroleum Resources is hereby prescribed because, government across the globe, is a bad manager of business enterprise. 6.2.2. Strengthening of Anti Corruption Agencies in Nigeria The Nigerian anti graft agencies namely, the EFCC and ICPC should be strengthened and granted legal and financial autonomy so as to wage effective war against corruption in the Oil and Gas sector of the nations economy. 6.2.3 Making Corruption a Capital Offence Corruption should be made a capital offence in our penal code, attracting death penalty to serve as deterrent to public officials who may wish to steal Nigerian Oil wealth. The maximum penalty of fourteen years imprisonment as presently prescribed in ICPC Act is ridiculous and inadequate. This accounts for the increasing wave of corruption particularly in the nations oil and gas industry. 6.2.4 Privatization of Oil and Gas Industry The nations Oil and Gas industry should be privatized while government provides regulatory framework for efficiency in the industry as is the case in the Norwegian Oil and Gas sector, which is renowned the world over as the most effective mechanism in the management of oil and gas industry.
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6.2.5 Establishment of New Oil RefOink eries Government should encourage establishment of new oil refineries and refurbish the existing ones to end the importation of petroleum product in Nigeria and avert the capital flight arising therefrom. 6.2.6 Repeal of Offending Sections of NOGCID Act All the identified infringing sections of the NOGICD Act, 2010, namely, sections 3, 11, 12 and 53 should be repealed and amended to bring them in harmony with global trade and investment law. 6.2.7 Integration and Participation of Niger Delta People The people of the oil rich Niger Delta of Nigeria should be properly integrated and greater opportunities provided for their participation in the nations oil and gas industry to avoid the perennial youth restiveness, agitations, oil pipeline vandalisation, kidnapping and senseless killings in the region. The author advocates 50% control of the oil wealth by the oil producing states while the federal government should control the remaining 50% to ensure peace, stability and development of the region. The 1999 Constitution of the Federal Republic of Nigeria should be amended to allow for resource control by the constituent states who in turn would pay taxes and royalty to the Federal Government. 6.2.8 Legalization of illegal Oil Refineries by the Government Government should legalize the operations of illegal oil refineries and provide regulatory framework to guide their operations in order to promote indigenous technology in the industry, give a sense of belonging to the oil producing communities and boost oil production in the country.
6.3 Proper Monitoring and Control of Nigeria's Water Ways There is the urgent and dire need for a proper monitoring of the bunker oil market trade in Nigeria. The trade in the way it is practiced now is most ill
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organized and thoroughly abused. It waOsk shocking to observe that despite the huge revenues that would have been accruing to the nation from licensing fees and for other services the Federal Government for whatsoever turned a blind eye to that sub-sector and refused to empower the DPR to do its work. The issuance of new bunkering license and the renewal of old one had been suspended since 1999 by the Federal Government and this had given room for all comers to what they like. Even those currently practicing the trade as today do not have any valid license as what they have has long expired. It was therefore not surprising of the apathy and brazen fear displayed by many of the practitioners when we sent our questionnaires. Even those who had advertised in the internet denied their advert. The DPR needs to be empowered to do its work to issue new licenses and to renew the old ones. By so doing that will enable them to properly monitor the activities of all practitioners in the trade. 6.3.1 Adequate Ocean Governance There is the need to have in place proper and adequate Ocean Governance for all activities going on in the region. It has been found out that there are so many criminal gangs operating in the creeks and waters in the region. These gangs constitute themselves into Law and order and thereby commit all sorts of atrocities in the region. There is therefore the urgent need to have in place the Niger Navy, Marine Police and other relevant agencies patrol the waters regularly to maintain Law and order. These agencies need to be properly equipped with patrol gunboats and Sophisticated Communication Equipment for easy of communication. More platforms should be built in strategic places in the region to enable effective monitoring. These will help to curb the activities of the oil thieves while providing security for life and property in the region.
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6.3.2 Efficient Management of Oil OSkpills There is the need to have in place an adequate Rapid Response Contingency plan to address the issue of spillage during bunker transfers into vessels. There are no readily available statistics of oil spills in the region. According to the IBIA, spills incidences could either be categorized in to two those less than 7 tons and those above 7 tons. Statistics of oil spills though it is a common knowledge that there were spills in the period under review were not readily available. A visit to website of FEPA and the newly established NOSDRA could not avail us of any statistics. However from Igwilo & Badejo (2004) it was gathered that there were menace. To combat these, there should be in place for a policy initiative whereby all notable and lead agencies like NOSDRA, FEPA, DPR, NEMA. Ecology fund and the Nimasa that have facilities to tackle of the oil spillage whether on small or large scale should come together to combat any spillage. These agencies should come together to put resources and efforts together. The acquisition of oil spill recovery and anti-pollution vessel would be a step in the right direction. These vessels are quite expensive and the pooling of resources is a step in the right direction.Another contingency plan that is supported and is recommended is one whereby a consortium of all the oil companies in Nigeria had establish a fulltime company that exclusively to handle oil spill incidents. By so doing any individual will simply invite CAN to come to its rescue. Majority of the respondents to the questionnaires sent are in agreement that as soon as a spill occurs all the contingence agencies should rally together to contain the spill while the polluter shall be required to offset all the expense. This measure we are also in support. This is in line with MARPOL 73/78 which Nigeria has also ratified. It encourages that anyone who pollutes our water with oil shall be penalized heavily and it shall no longer be business as usual.
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6.3.3 Eradication of Pipeline VandaOlkisation The writer recommends that the Nigerian Civil Defence Corps- a paramilitary agency should be assigned fully the task of monitoring and protecting oil pipelines in Nigeria. This organization has achieved a lot of success in the areas where they had been deployed and we wish to support that they take over the assignment fully. The weakness and deterioration in strength due to wear and tear of the NNPC pipelines had made it very easy for pipeline vandals to steal oil from this pipeline. These pipeline networks were all laid in 1976 and no doubt needs replacement now. The government should reconsider their replacement as a matter of top urgency. 6.3.4 Chemical Finger Printing of Crude Oil In the course of this research, it was uncovered that Nigerian oil companies had developed a technology whereby it is possible to trace all the crude oil extracted in the country to its individual flow station and even to individual oil wells. In June 2007, shell petroleum had proposed that oil exports from the country should be certified based on this technology which is also called "CHEMICALFINGER PRINTING". We wish to support this proposal for its immediate implementation. Through this means, it is easier to capture and collate all data released on crude oil production and export in the country. Secondly, Chemical Fingering of crude oil will help monitor and deter illegal bunkerers as any oil stolen can easily be traced. Monitoring authorities can stop a vessel carrying oil and if a sample of the oil is taken and tested and do not have a record of legitimate source or sale, the vessel can be confiscated with its contents. The Nigerian government could also inform all refineries worldwide against buying our bonny light the type of crude to verify the provenance of the crude they are buying. Chemical Finger printing of crude oil makes it possible to create a proper record for the crude and will therefore discourage oil theft and illegal bunkering.
174 Ituma ..... ..Int. J. Business & Law Research 5(3):1-187, 2017 6.3.5 Signing of Agreement with NOekigbouring States The Federal government should as a matter of urgency put in a place measures designed to address the demand side of the illegal oil bunkering equation. These measures will include those which will discourage the illegal side of oil to neigbouring countries. If there are no readymade buyers of stolen oil, the thieves will have a rethink of their nefarious activities. It was confirmed publicly in the June 2003 by the Cote divoire Minister for Mines & Energy Monnet Leon Emmanuel that much of the crude oil refined in their countrys refineries were stolen from Nigeria. Taking a cue from that, Nigeria signed an agreement on19th August 2003 with the government of code divore for the supply of 30,000 bpd of crude oil so as to reduce illegal sale of oil to that country. Such agreement should also be extended to neighbour and nearby states like Ghana, Togo, Benin Republic who have refineries but no crude in their countries.
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Sample Questionnaire 1. Is NOGICD Act 2010 consistent with GATT, 1994? 2. Is NOGICD Act 2010 in conformity with TRIMs, 1994? 3. Is NOGICD Act 2010 in line with Quantitative Restriction? 4. Is NOGICD Act 2010 consistent with Nigerias GATS specific commitment? 5. Does NOGICD Act 2010 in breach of Nigerias National Treatment Obligation under GATT, 1994? 6. Does NOGICD Act 2010 in conformity with Nigerias obligations under various Bilateral Investment Treaties? 7. Can Nigeria be exonerated by the exceptions in Articles XVIII, XX and XXI of GATT, 1994? 8. Has NOGICD Act 2010 achieved its objectives since 2010 till date? 9. If your answer in 8 above is in the negative, why did the law fail to achieve its mandate? 10. Has NOGICD Act 2010 gone down well with Nigerias trading partners? 11. What have been the reactions of Nigerias International Trading Partners, regarding the law? 12. Has NOGICD Act 2010 attracted more FDI to Nigeria since 2010? 13.Has the law created more jobs in the country? 14. Has the law transferred the needed technology to Nigerians? 15.Did the law enthrone efficiency in the Oil and Gas Industry of Nigeria? 16. Has the law ensured harmonious working environment between the NCDMB and other sister agencies? 17.What is the way forward for the Nations Oil and Gas Industry? 18. Does the law amount to duplication of functions? 19. What can be done to curtail corruption in Nigerias Oil and Gas Industry?
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20. What measure is most appropriate to stOokp oil bunkering in the Nations water ways? 21.Can liberalization of the sector guarantee the desired economic prosperity? 22. Can privatization be a panacea to the Nations Oil and Gas sector?

GT Nigeria's Laws

File: science-law-chongqing-china.pdf
Title: FUNDAMENTAL LEGAL ISSUES CONCERNING THE NIGERIAN OIL AND GAS INDUSTRY CONTENT DEVELOPMENT ACT 2010
Author: GT Nigeria's Laws
Author: SUNEZ
Published: Thu Aug 17 23:14:03 2017
Pages: 187
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