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  • Nigeria’s Electoral Processes and Institutions: Rebuilding Using the Justice Uwais Report | Olisa Agbakoba Legal

    Nigeria’s Electoral Processes and Institutions: Rebuilding Using the Justice Uwais Report | Olisa Agbakoba Legal

    Nigeria’s Electoral Processes and Institutions Rebuilding: A Case For the Implementation of the Justice Uwais Report

    THE 2019 GENERAL ELECTIONS

    The 2019 general elections were conducted on the framework of the Constitution of the Federal Republic of Nigeria 1999 (as amended) and Electoral Act 2010 (as amended). There were many problems with the 2019 general elections as the reports of local and international election observers reveal. In sum, there were logistical problems. INEC could not efficiently distribute election materials across the country resulting in the postponement of the elections from February 16th to February 23rd, 2019.  Even after the postponement, INEC did not get election materials to some polling booths in the country until midday of the election. 

    The card reader machines used to authenticate registered voters failed to work in most parts of the country disenfranchising thousands of eligible voters. The voting and collation procedure for the general elections was slow and cumbersome. INEC did not collate and announce election results in real-time. This created tension and a lot of anxiety. The 91 registered political parties did not show any remarkable improvement in electoral penetration. Many of the parties behaved as annexes of the dominant political parties (that is the People’s Democratic Party (PDP) and the All Progressives Congress (APC)).

    The few political parties that actively participated in Nigeria’s electoral processes garnered about 3 percent of total votes cast. There is a general lack of confidence in the courts and election tribunals. The courts and election tribunal rules are skewed unfairly against the petitioner.  Four major issues can be said to characterize the 2019 general elections. The first is the abject performance of Nigeria’s political parties. The second issue is the apparent inability of the Independent National Electoral Commission (INEC) to deliver on its mandate. The third is the slow and cumbersome procedure of voting and collation of election results. The Fourth is the lack of confidence in the election conflict management processes and institutions.

    REPORT OF THE ELECTORAL REFORM COMMITTEE OTHERWISE KNOWN AS THE JUSTICE UWAIS REPORT

    In the aftermath of the 2007 general elections, the federal government established a 22 Member Electoral Reform Committee. The Committee was chaired by Hon. Justice Mohammed Lawal Uwais Retired. The Committee was charged with examining “…. the entire electoral process with a view to ensuring that that we raise the quality and standard of our general elections thereby deepen our democracy” This was understandable since that election was regarded as one of the worst in the nation’s electoral history. 

    The Electoral Act 2010 is a direct response to the Uwais Report published in 2008. Even though many aspects of the Uwais Report influenced the Electoral Act 2010 there are many aspects of the Uwais Report that were abandoned. Certain Amendments to the Constitution of the Federal Republic of Nigeria 1999 were also a reaction to the Uwais Report; it was felt in some quarters that the adopted portions of the Uwais Report provided an adequate legal framework for elections in Nigeria. Regrettably, that has not been the case. The outcome of 2011, 2015, and 2019 general elections in Nigeria has been far from acceptable. This paper examines the four major issues that characterized the 2019 general elections and proffers solutions from the Uwais Report.

    IMPROVING THE PERFORMANCE OF POLITICAL PARTIES

    Nigeria has 91 registered political parties. 73 out of the 91 registered political parties participated in the February 23, 2019, Presidential Elections. This is the highest number of Presidential candidates in Nigeria’s electoral history. However, the results of the elections released by INEC did not reflect the huge number of political party parties that participated.  Out of a total of 27, 324, 583 valid votes cast at the election, the dominant parties (that is PDP and APC) garnered a total of 26,454,825 votes.  The other 71 political parties scored 869, 758 votes which are about 3% of total valid votes cast.  This has raised concerns about the continued existence of 91 registered political parties.  In the past, several efforts were made to limit the number of registered political parties in Nigeria by imposing stringent registration requirements. In view of the constitutional right to freedom of association, the courts have adopted a liberal interpretation of S 222 of the Constitution that deals with the registration of political parties. 

    In INDEPENDENT NATIONAL ELECTORAL COMMISSION V. ALHAJI ABDUL KADIR BALARABE MUSA [2003] FWLR (PT. 145) 729, INEC in the exercise of its powers in the Electoral Act 2001 and the Constitution to register political parties introduced registration guidelines higher than those contained in the Constitution of the Federal Republic of Nigeria 1999. The Supreme Court held that INEC cannot impose registration requirements higher than those prescribed by the Constitution. In the aftermath of the 2011 general elections, INEC tried to deregister certain political parties in accordance with the powers granted by Section 78 (7) of the Electoral Act 2010 which enable INEC to deregister a political party that breaches any of the requirements of registration or fails to win the presidential or governorship election or a seat in the National or State Assembly. In a plethora of cases, the courts have stopped INEC from deregistering political parties.

     

    There is no doubt that some political parties have become rent-seekers extracting value for their existence. The Uwais Report tried to address this mischief by incentivizing genuine political parties.  The Uwais Report recommended a combination of proportional representation and the majoritarian rule of representation at federal, state, and local levels. The mixed system would entail creating an additional 30% of the existing legislative seats in the national, state, and local government levels for the purposes of proportional representation. The threshold shall then be established which is the number of votes cast in the First-Past-The –Post-election divided by the number of available proportional representation seats. Political parties shall then nominate for proportional representation at 30% female candidates and 2% physically challenged candidates for legislative elections. Political parties that win up to 70% of the seats in an election conducted under the First-Past-The – Post-election shall not be eligible to benefit from the propositional representation. The criterion, for the production of the party list, was to be included in an amended Electoral Act. Unfortunately, this Uwais Report recommendation was not incorporated into the Electoral Act 2010. The need for proportional representation is overdue and would greatly assist with the growth and performance of genuine political parties in Nigeria.

     

    ADDRESSING INEC’s INEFFICIENCY 

    The Independent National Electoral Commission (INEC) by virtue of Paragraph 15 Part 1 of the Third Schedule to the Constitution of the Federal Republic of Nigeria 1999 (as amended) is saddled with the task of conducting elections, carrying out voter’s registration, preparing logistics for the elections, registration of political parties, among other functions. INEC, as presently constituted, is overburdened, ill-equipped, and lacks the required manpower to effectively deliver on its mandate without hiccups. In the 2019 presidential elections, INEC did not efficiently deliver election materials across the country. This resulted in the postponement of the Presidential Election from February 16th, 2019 to February 23, 2019. Even after the postponement, reports of international and local observers indicate, INEC did not deliver election materials to some polling booths across the country until midday into the elections. 

    This is not the first time INEC has had to postpone elections for logistic reasons. In 2011, INEC cited logistics reasons for the shift in the date of the general election. The commission had said that vital election materials had not been supplied days to the general elections. The Uwais Report addressed this challenge by recommending the creation of the following special commissions: the Political Parties Registration and Regulation Commission, the Electoral Offenses Commission, a Constituency Delineation Commission, and the Centre for Democratic studies. This was primarily to unbundle INEC and refocus it strictly on conducting general elections while the new bodies would be saddled with pre and post elections matters. Sadly, the recommendation was not incorporated into the Electoral Act of 2010. In view of INEC’s continued dismal performance, it is imperative to reconsider the Uwais Report Recommendation to unbundle INEC.

    MODERNIZING NIGERIA’S VOTING AND COLLATION PROCESS

    Nigeria’s electoral processes currently comprises of a semi-electronic voting system. Registration of voters is done electronically but voting and collation of results are done manually. The use of card reader machines for authentication of voters has not significantly improved the credibility of the election process. The present method of voting in Nigeria is the Open Secret Ballot System (OSBS) in which the prospective voter goes through a process of accreditation, receives a ballot paper from the appropriate poll official, and thereafter makes the confidential thumb impression in favor of the political party of choice in a secret voting compartment before dropping the ballot in the box positioned in the open, in the full glare of officials, security and party agents. The collation of election results is also done manually. It is incrementally done at polling booths, electoral wards, local governments, states, and federal for the presidential election.

    This process is ridiculously slow and cumbersome. In the 2019 presidential elections, it took INEC a total of 4 days to conclude the process of voting and collation of results. This created tension and a lot of anxiety.  There is an urgent need to modernize the voting and collation process by introducing electronic voting. Electronic voting will drastically reduce the time it takes to vote, collate, and release election results. It will, to a certain level limit the involvement of persons from accreditation to result in the release and increase voter participation. A voter can register in one part of the country and vote in another.

    The Uwais Report recommended a gradual introduction of electronic voting in Nigeria’s electoral processes. The report was submitted in 2008. 11 years after, Nigeria is ready for electronic voting.  The Electoral Act 2010 (as amended) does not make express provision for electronic voting. Rather, Section 52 (2) of the Electoral Act 2010 (as amended) gives INEC the discretion to determine the procedure for voting. It was on the basis of Section 52(2) of the Electoral Act 2010 (as amended) that INEC introduced card reader machines. What is unclear however is whether INECs discretion in s 52 (2) extends to introducing electronic voting. The Electoral Act Amendment Bill 2018 has amended s 52 (2) to now include electronic voting and any other methods of voting INEC determine from time to time.  Regrettably, the Electoral Act Amendment Bill 2018 was not signed into law by President Buhari before the 2019 Elections. The President claimed the 2018 amendment was too close to the 2019 elections but promised to give effect to the law after the elections. It is important President Buhari gives effect to the Electoral Act Amendment Bill 2018 as promised. 

    RESTORING CONFIDENCE IN THE ELECTION PETITION TRIBUNALS

    The process of dealing with complaints and resolving election disputes is critical to the survival of any democracy, particularly a fragile one like Nigeria.  In Nigeria’s electoral processes, in addition to monitoring the voting and collation process, attention must also be paid to the process of dealing with election complaints. Over the years, this has not been the case. The result is that the election petition process has become unfairly skewed against the petitioner.  Take for instance the issue of burden of proof otherwise known as the doctrine of substantial compliance, which is to the effect that an election shall not be invalidated by reason of irregularities or non-compliance to the electoral law as long as it is conducted substantially in accordance with the electoral laws and the irregularities and non-compliance did not affect the result of the election. The substantial compliance doctrine places two evidential burdens on a petitioner.

    The first burden is that the petitioner has to prove irregularities and non-compliance with the electoral law. The second evidential burden is that the petitioner has to prove that the irregularities and non-compliance with the electoral law affected the results of the election. The substantial compliance doctrine was first applied by the Supreme Court in AWOLOWO V. SHAGARI (1979) NSCC 87. It was applied in several other cases such: BUHARI V. OBASANJO (2005) 13 NWLR (PT. 941), OBASANJO V. YUSUF (2004) 9 NWLR (Part 877) 144, BUHARI V. INEC & 4 ORS (SC 51/2008) 12 DEC 2008, ABUBAKAR, GCON & 2 ORS V. YAR ADUA & 5 ORS (SC72/2008) 12 DEC 2008, CPC V. INEC & 40 ORS SC 426/2011) 28 DEC 2011. It is on record that no presidential election has been upturned in Nigeria on account of the doctrine of substantial compliance. 

    The Uwais Report relieved this onerous burden placed on the petitioner by recommending that the burden of proof for election petitions be placed on INEC and the Respondent. The thinking is that since INEC conducted the election and the Respondent is the beneficiary, it will be easy for INEC and the Respondent to prove that the election was conducted substantially in accordance with the electoral law. Unfortunately, this Uwais Report recommendation was not incorporated into the Electoral Act 2010. Shifting the burden of proof in election petitions from the Petitioner to INEC and the Respondent will substantially restore confidence in the election tribunals.  

    CONCLUSION

    The recently concluded 2019 general elections have revealed that there are major issues with Nigeria’s electoral processes and institutions. There is an urgent need to rebuild Nigeria’s electoral processes and institutions.  The Uwais Report contains viable recommendations that can transform Nigeria’s elections.  It is our hope that the government will reconsider some of the recommendations of the Uwais Report with a view to making the outcome of elections in Nigeria transparent, credible, and acceptable. 

    Written By: Collins Okeke, Senior Associate/ Head-Public Interest and Development Law Practice Group – Olisa Agbakoba Legal. 

     

  • Can Cooperative Federalism Work in Nigeria?

    Can Cooperative Federalism Work in Nigeria?

    Can Cooperative Federalism Work in Nigeria?  – A publication of Olisa Agbakoba Legal

    Nigeria is a country of so many ethnic nationalities and so has been striving to evolve a workable framework that harmonizes the often conflicting interests of these nationalities. As a result of our large population and territory, the most effective political system is federalism because it enables us to have diverse ways of organizing ourselves. Many people say the 1963 Republican Constitution was the best ever because it allowed the different regions to express themselves. 

    The South produced cocoa, the North groundnut, and the East palm oil. There was space for each region. But today people criticize strong unitary federalism because it forces the component units under a strong center and so most people feel returning to the 1963 Constitution is better and therefore restructuring has become a big issue. But restructuring has challenges because it has to be nationally accepted but has not. The issue is whether to look for other models? Restructuring is like sitting atop a 10 story building which we will eventually get to. But we have to come from the ground floor up.  This is why I have proposed Cooperative Federalism for consideration. Of course, there are many other models of Federalism.  

    George Anderson, in his book “Federalism: An Introduction”, has identified some of the models. There are dualist and integrated models of Federalism. The dualist model typically assigns different jurisdictions to each order of government, which then delivers and administers its own programs. The integrated model provides for many shared competences and the constituent – unit governments often administer centrally legislated programs or laws. Under the dualist, or classical, model of federalism, constitutional jurisdiction over different subjects is usually assigned exclusively to one order of government. In this model, each order of government normally delivers programs in its area of responsibility, using its civil service and departments; the federal government’s departments are thus present throughout the country.

    In practice, the dualist model does not achieve a neat separation of powers because so many issues have regional, national, even international dimensions, and many different responsibilities of governments are themselves intertwined. In all dualist constitutions, there are some shared or concurrent powers in which both orders of government can make laws. Canada and Belgium have few concurrent powers, while Australia has very extensive concurrency. Where powers are concurrent, federal law is generally, but not always, paramount, meaning it prevails in cases of conflict. Also, there can be de facto concurrency when both orders of government have different powers that bear on a question: this is a kind of shared power and typically it does not involve paramountcy. For example, in old constitutions, the environment is not usually a head of power, but both orders of government may have different legal powers that permit them to regulate the environmental impacts of a major infrastructure project, so it can proceed only if they both agree.

    Under the integrated (or interlocking) model of federalism, exemplified by Germany, some subject matters are exclusively assigned to one order of government (e.g. defense to the federal government), but most subject matters are concurrent, where the central government sets framework legislation that the constituent units can complement (but not contravene) with their own legislation. As well, the governments of the constituent units deliver programs in these concurrent areas. Thus the central government has a small civil service in the regions, largely limited to its areas of exclusive competence. This model is also sometimes called administrative federalism because the principal powers of the constituent units are administrative. A great challenge in this model is restricting the detail of central policy-making to leave room for decisions and laws at the level of constituent units. The German model also provides for joint decision making affecting these areas of concurrency, in that relevant federal laws must be approved by a majority vote of the representatives of the Lander in the Bundesrat.  South Africa has adopted aspects of this model. Canada, Brazil, and the United States are examples of largely dualist federations; Germany, Austria, South Africa, and Spain follow the interlocking model. India and Switzerland have strong features of both. Australia is largely dualist in administrative arrangements but has so many areas of concurrency that it has some strongly interlocking features. 

    What these models illustrate is that no federation is purely of one form.  The purpose of a federation is for the different power centers Federal and states to cooperate. In our case, as it relates to Cooperative Federalism, States and the Federal Government can work together for economic development.  Infrastructure and solid minerals development readily come to mind. Based on the principle of subsidiarity in Federalism which is incorporating the government closest to the people, infrastructure can be commonly developed, for instance, the East-West High Way that has been uncompleted because responsibility excludes relevant state governments but under the principle of subsidiarity including state governments improves implementation and also ownership. States with solid minerals can have cooperative federalism with the federal government to explore their solid minerals. Ondo state has one of the world’s richest bitumen; Enugu has one of the world’s richest reserve of coal, Ebony has one of the best salt mines valued at about N14 billion.

    What stops states from cooperating with the federal government to harness minerals?  Look at police, in the Constitution under the National Police Council, all the 36 state governors play a role in picking the Inspector General of Police but the states have never requested that the President summon a meeting of the Police Council since 1998 yet they complain. Actually, under the current Constitution under both the exclusive and concurrent list schemes of cooperation exist but it has not been harnessed, for example, states can build power stations and there are several other schemes. So rather than looking to restructuring which is distant, it is good to look at what is in the 1999 Constitution because that cooperation will allow development. This is no way derogates from Restructuring. It simply means we all have to work towards attaining the goal of restructuring but we can have Cooperative Federalism to deepen the process of democracy.

    Written By: Dr. Olisa Agbakoba (SAN, OON, FcAirb) – Senior Partner, Olisa Agbakoba Legal

  • The Doctrine of Hot Pursuit – Where, How and When Can I Arrest an Escaping Ship? | Olisa Agbakoba Legal

    The Doctrine of Hot Pursuit – Where, How and When Can I Arrest an Escaping Ship? | Olisa Agbakoba Legal

    The Doctrine of Hot Pursuit – Where, How, and When Can I Arrest an Escaping Ship?  by Olisa Agbakoba Legal 

    Two fundamental concepts are related to the law and practice of ship arrest in maritime law. The first is that it is an action in rem. The second is that its rules and procedures fall largely under the admiralty jurisdiction of states. There is in essence, no concrete uniformity internationally about the rules of ship arrest. In fact, Art 6 of the 1952 International Convention On Arrest Of Ships (Arrest Convention) provides that the rules of procedure relating to the arrest of a ship shall be governed by the law of the contracting state in which the arrest is made or applied for.

    However, the case of an escaping ship or vessel may present fresh problems. How is a ship arrested? Is there a right to re-arrest a ship that is trying to escape jurisdiction? If so, who can pursue, from whence, and how far? These are queries we hope to answer in this inquiry.

    Mode of Arrest and Prevention of Escape

    By referring to an escaping ship, we proceed from certain assumptions. The first is that a valid arrest order has been made by the competent court of the forum from which the affected ship proceeded and secondly that the writ in rem cannot be served outside the jurisdiction.

    The primary purpose of arrest is to obtain security for the satisfaction of an ensuing judgment in the action in rem. This arrest in fact constitutes the ship or property as security in the hands of the court for the claim in the action. As Esher M.R. put it, “the moment that the arrest takes place, the ship is adjudged by it to be due to the claimant”. 

    Certain features are commonly observed in the current procedure of ship arrest in various jurisdictions. Upon the issue of the warrant of arrest, the Admiralty Marshal immediately contacts the relevant officer of Customs and Excise or Port Authority as the case may be. An Official of government then arrests the ship. In Britain, this is done by the personal assistance of the Marshals office who attaches the note of action to the ship. In the United States, Once the arresting party has obtained a warrant of arrest from the Court, the U.S. Marshal Service will serve the Court’s warrant on the vessel to affect the arrest. Rule C(3)(b) The Federal Rules of Civil Procedure (F.R.C.P.)’s Supplemental Rules for Certain Admiralty and Maritime Claims provides that only the marshal may serve the warrant to seize the vessel.

    In Germany, a court’s registrar or the bailiff is responsible for the enforcement of the arrest upon a separate application. To attach a foreign vessel, the creditor will instruct the bailiff who visits the vessel mostly under police attendance and fixes a chain at her wheel as a symbol of the arrest. More important is the information is given to the port authorities who will prevent the vessel from sailing if the arrest is in existence.

    In Nigeria, the applicable laws on ship arrest are found in Order 45 of the Federal High Court (Civil Procedure) Rules 2019, the Admiralty Jurisdiction Act (AJA) 1991; and Order 7 of the Admiralty Jurisdiction Procedure Rules 2011. The AJA (1991) provides nothing on the probability of escape. However, it is clear that here, as in other jurisdictions, the probability of escape is at the center of the ship arrest procedure.

    Thus in practice, the Nigerian courts have been enthusiastic in preventing the escape of arrested vessels. In other parts of the world, where it is shown that a ship is immobile or dry-docked, there will no longer be the need to make an arrest. In Nigeria, the court may indeed still proceed to issue an order arresting such a ship. This was the case in M.T.Derby (FHC/L/CS/121/92) Niger dock (Nigeria) Limited v The Owners of the M.T.Derby, the ship though dry-docked in Lagos and with no possibility of escape from jurisdiction, was still arrested.

    When is a Ship Arrested?

    Now it would appear that before a warrant of arrest is executed, there can be no talk of escape. In other words, if a shipowner by some ingenious means learns that steps are being taken to arrest his ship, he can proceed to expeditiously remove the ship from the jurisdiction. As long as the normal rules and regulations concerning the arrival and departure of ships in the particular port are observed, nothing inherently illegal would have taken place. The morality of the matter is another issue. The question then is when is the warrant for the ship executed? Is it when it is issued by the Court? Or when it is served on the particular ship by the physical acts of placing a copy of the warrant on the ship. The preferred view is that the warrant must be ’delivered’ on the ship for execution to be said to have taken place.

    The Effect of Arrest

    Once the warrant for arrest has been properly executed, the property is arrested and is in the custody of the Admiralty Marshal on behalf of the Court. Interference by any party with the arrest process such as attempting to remove the property from the jurisdiction is an illegal and criminal act. While this point has not received judicial attention in Nigeria, certain British authorities exist showing that knowledge that an arrest order has been issued is enough to prevent anyone from removing a ship from the jurisdiction. Interference would be a contempt of court amounting to a committal.

    Application of The Doctrine of Hot Pursuit

    Since the ship under arrest is actually in the custody of the Admiralty Marshal and not merely in private hands, the duty to pursue and retrieve an escaping ship falls on state agents and security services. Private persons cannot under international law embark upon hot pursuit. There is however a clear advantage in the continued vigilance of the claimant in order to be able to alert the authorities when his security is in peril of being removed from the jurisdiction.

    the doctrine of hot pursuitIf the escaping ship is rearrested while navigating within the territorial sea (i.e within 12 nautical miles, See Art 3 U.N.Convention on the Law of the Sea)then there can be no question of the competence of the coastal state to rearrest it. On the other hand, the escaping ship may have entered into other maritime zones. In this case, a pursuit that has started within the territorial sea may be maintained through the contiguous zone, to the exclusive economic zone E.E.Z and on to the high seas.

    The doctrine of hot pursuit developed from customary international law and has been codified under Article 111 of the Convention on the Laws of the Sea, 1982. It means in essence that if there are reasonable grounds to believe that a foreign ship or one of its boats in internal waters, territorial sea, exclusive economic zone, continental shelf, has violated the laws or regulations of the coastal state or infringed on the rights conferred on it by international law, such ship may be pursued by the coastal state by any of the state vessels well into the high seas. The principle of hot pursuit is designed to ensure that an erring vehicle cannot escape jurisdiction by making a fleeting dash for the high seas. If it does so, the doctrine of hot pursuit will operate to allow an extension of the jurisdiction of the coastal seas to pursue and seize the escaping ship. If apprehended, the ship may be escorted back to port for investigation and trial.

    The doctrine of Hot pursuit is however subject to certain conditions that must be mentioned here. In the first place, the pursuit must be continuous and unbroken. Intermittent pursuit or abandonment of pursuit and subsequent resumption will no longer be ‘hot pursuit’. Therefore, the Admiralty Marshal must act timeously and be diligent in effecting the pursuit in order to remain within the scope of international law. For instance, it is of serious doubt if pursuit can commence under this doctrine when the escaping ship is already within the contiguous zone(1.e the next 12 miles the end of the territorial sea). This is because arrest can only be made therein for specifically those offenses for which the zone was created. Secondly, pursuit even if continuous and unbroken must end upon entry into the territorial waters of the flag state or any other state.

    Thirdly, where facts, later on, reveal that the circumstances did not warrant hot pursuit and seizure, due compensation must be paid for loss or damage. Severe penalties are laid down by Article 22(3)of the(1958)High Seas Convention to regulate such an eventuality. The International Law Commission rightly believes that these provisions are justified in order to prevent the right from being abused.

    Furthermore, where such a ship is pursued and arrested in a manner not justifiable in the circumstance, even if there may be a cause of action such as where the Plaintiff knows that the Defendant was genuinely unaware that an arrest warrant was made, the Defendant would be entitled to reliefs under the pertinent Admiralty rules. In Nigeria, such statutory reliefs are specified in Order XI of the Admiralty Jurisdiction Rules (2011)and section 13 of the Admiralty Jurisdiction Act (1991).

  • Design Thinking in the Legal Industry: Introduction to Legal Design

    Design Thinking in the Legal Industry: Introduction to Legal Design

    Design Thinking in the Legal Industry (Legal Design) is the application of human-centered design to the world of law, to make legal systems and services more human-centered, usable, and satisfying. It is a process of applying the principles of design thinking to the practice of law and access to justice. 

    The Society for Computers and Law defines Legal Design as “delivering the law differently – according to the needs of the people the law is intended to serve – so that it is more engaging, easier to understand and more accessible for people”.

    Legal design is a way of creating and making legal services accessible, with a focus on how usable, useful, and engaging these services are. 

    Design Thinking at a Glance

    As a principal concept of problem-solving, design thinking has been adopted across various sectors of the economy. It has been used to develop new ways of solving old problems with the customer being at the center of all the firm’s efforts. 

    It is an approach to problem-solving that takes into account the specific needs of the users and building solutions that would meet those needs as satisfactorily as possible. In as much as it’s a process, once it becomes common practice and widespread within an organisation, it becomes a mindset.  

    Design Thinking always starts with the end in focus; only through constant contact and observation of the end-users can firms successfully develop solutions that meet their needs. 

     

    Design Thinking Application in Other Sectors

    Design Thinking has been adopted in solving problems in different sectors of the economy in different countries. We will take a look at one of them.

    The Problem of Financial Inclusion 

    The problem of financial inclusion is one that persists all over the world especially in developing nations. In a 2017 survey conducted by the World Bank, 64% of Nigerian respondents cited “having too little money to use an account” as a reason for not having a financial institution account. Low-income earners are more likely to be excluded than high-income earners and despite the CBN’s and other agencies’ efforts to solve this problem, it’s still existing till now. 

    How Design Thinking Helped Improve Financial Inclusion in Bangladesh

    A recent Phillips Consulting Report highlights the unique case of Grameen Bank in Bangladesh.  Grameen Bank, a community development bank and microfinance organisation that provides financial services to the underserved and largely unbanked designed a credit delivery system to provide banking services to the rural poor. The bank identified poverty as one of the reasons why a large percentage of their population remained financially excluded and provided microcredit to the poor without collateral.   This solution solved 2 major problems: The problem of financial inclusion and the problem of poverty to a large extent. Microfinance banks were already in existence but Professor Yunus of Grameen Bank leveraged on design thinking to develop a version of the banking model that worked for his end-users. 

    Ref: Phillips Consulting Limited: Design Thinking for Financial Inclusion, Nov. 2019

    Adoption of Design Thinking in the Legal Industry in Nigeria (Legal Design):  Emergence of New Legal Business Models. 

    We will agree that the market for legal services is changing. Clients’ needs have become more pressing, new markets are emerging and client expectations have greatly adjusted. This underscores the need for lawyers and law firms, in general, to develop new approaches to solving client problems, maximizing human and other organisational resources and at the same time promoting a culture of constant innovation and creativity within the firm. 

    What are the objectives of Legal Design? 

    • Helping the layperson understand the legal professional;
    • Help Law firms achieve incremental short-term improvements and breakthrough long-term change.
    • Help Law firms understand the unique needs of their clients then design for their specific needs to create tailored legal solutions that actually work.

    Areas of Design Thinking Application  in the Legal Industry

    Information Design: This is communicating with law firm clients or prospects from their point of view. It entails breaking down complex legal terms that will educate them and add value to them as individuals and to their respective businesses. 

    Organisational Design: This is structuring and designing our law firms in such a way that the client is at the heart of whatever activities that go on within our organisation. This will promote efficiency in operations and work output. 

    The application of design thinking to our organisational structures will lead to the creation of niche practices and the establishment of boutique law firms. Firms will begin to unbundle large and complex practice areas to focus on fewer and specific ones.  This will increase the chances of specialisation and bring about the rise of a new type of legal expert ( the ones in tune with practices in otherwise overlooked areas of the economy). For instance, a law firm with a robust banking and financial services/Fintech practice may decide to spin-off a smaller practice or focus group that is dedicated to Fintech alone which functions differently from the general practice in order to improve efficiency. This will lead to the creation of legal services tailored to the Fintech sector.  

     

    Product Design – Introducing Legal As a Service (LaaS) Business Models

    As the adoption of legal tech among law firms shows no sign of slowing down, a new business model is on the rise. This new model makes legal software applications directly available to clients over the internet.

     The business model shares many similarities with the Software as a Service (SaaS) software licensing and delivery model.  LaaS is an innovative framework designed to afford clients the benefits of accessing legal services at an affordable, CONSISTENT price. Patterned after the managed services delivery model in the IT industry, the LaaS model delivers legal services proactively in a preventative way with reasonable consistent costs.

    Design Thinking Process in the Development of Legal Tech Services

    • Empathy – Put yourself in the shoes of the client or the legal service user so as to understand their pressing needs.
    • Define the Problem – After Empathizing with the users, list out the specific problems they are faced with. In these parts of the world, this can be Access to Justice, Resolution of Commercial Disputes, Client Representation, Document Generation, etc. 
    • Ideate – Come up with ideas that can solve the problems that you have outlined. 
    • Prototype – Develop prototypes of these ideas and deploy them for testing. 
    • Test – Test these new products and solutions, gather insights and improve on the products to achieve product-market fit.  

    Areas that Legal Tech Can Be Adopted 

    • Client Intake and Engagement: With the introduction of technology, client intake, acquisition and engagement can now be automated. The development of chatbots, legal directories, and other software solutions will bring law firms close to prospective clients and clients can interface with them in real-time. 
    • Feedback Mechanisms: With simple feedback solutions, clients can now give instant feedback on services rendered by lawyers, their whole client experience and many other important metrics with which we determine the success of your legal practice. 
    • Document Builder and Document Review solutions: The generation of documents such as simple contractual agreements can be automated using advanced technology.
    • Legal Directory (Find a Lawyer) 
    • AI and Machine Learning Solutions which can be used to predict the outcome of cases, find precedents and automate workflow.
    • Personalisation of the client journey

     

    What does the Application of Design Thinking in the Legal Industry mean for Clients 

    For Businesses and Individuals, legal design will:

    • make legal services less ambiguous and easily understandable. 
    • Make them more empowered and in control of the complexities of their legal matters and the laws that apply to them and their businesses.
    • Equip them to make the right decisions as it relates to their businesses and the law. 
    • Cuts down the time required for them to have their legal needs met.

    What Does the Application of Design Thinking in the Legal Industry Mean for Law Firms?

    When applied, Legal Design will help law firms:

    • Work Smarter and not necessarily harder – This helps build an agile system of work as opposed to a rigid structure. 
    • It helps law firms become more predictive as opposed to being responsive to the changing needs in their operating environment. 
    • Remain competitive as their products and solutions are built from the existing needs of the end-user. 
    • Deploy Technology more efficiently and improve internal processes in the organisation. 
    • Maintain a quicker turnaround time in delivery of client services excluding litigation or other statutory matters. 
    • Create a pathway for other non-legal professionals to play an active part in adding value to the firm (i.e creation of new roles such as business development managers, Data Analysts, product managers, etc)
    • Become more forward-thinking and creative in generating solutions for problems
    • Put their focus on the client, and win clients in better ways, deliver them better services tailored to their explicit (and buried) needs — and to communicate information to them in clearer, more compelling, and more usable ways.
    • Build a new set of professional paths and opportunities for lawyers, with new kinds of jobs and competencies.
    • Develop new ways of collaborating, improving processes and decision-making, and build stronger communities inside of legal workplaces
    • Generate ideas of how to serve clients, lawyers, and the general public in new ways — through technology or otherwise, and to build ideas into viable products and businesses.

    Adopting Design Thinking in the Legal Industry: Promoting Innovation in the workplace. 

    Contrary to what some might believe, Design Thinking is not a Wild West scenario devoid of rules. Despite the workplace freedoms associated with it, Design Thinking does not eliminate the need for clearly defined corporate governance structures, following precedents or being detailed in the execution of work. In actual fact, it should be viewed as the introduction of creativity into detailed processes that will lead to developing creative and innovative solutions to each problem we are faced with.

    To foster an atmosphere of design thinking and innovative problem solving, Law firms should foster the following in the work environment:

    • Curiosity
    • Collaboration 
    • Action
    • Experimentation

     

    Conclusion

    Embracing design thinking requires a mindset shift for legal professionals. It necessitates redesigning processes and current practices to focus on the ‘users’ of legal services and the legal system as a whole. 

    Importantly, design thinking cultivates a culture of innovation in the legal profession that not only benefits clients, but can also pave the way towards building better law for all stakeholders in the legal ecosystem.

    It will also go a long way to make law firms more efficient in the delivery of their services while at the same time improving accessibility, understanding of key legal concepts for businesses and individuals.

     

    Written By: Stephanie Etiaka, Communications Officer & Beverley Agbakoba-Onyejianya (Senior Associate/Head- Sports, Entertainment and Technology Practice)

  • The Impact of COVID-19 Regulations on Human Rights and the Rule of Law in Nigeria | Olisa Agbakoba Legal

    The Impact of COVID-19 Regulations on Human Rights and the Rule of Law in Nigeria | Olisa Agbakoba Legal

    Introduction

    Nigeria recorded her first case of COVID-19 on February 27, 2020, when an Italian who returned to Lagos for work tested positive to the virus. Since then, Nigeria has recorded an increase in the number of infections, as well as fatalities. The rise in the number of infected persons led the Nigerian Government to implement regulatory measures to curb the spread of COVID-19 at both federal and state levels. This report highlights regulatory measures introduced in Nigeria in response to COVID-19. It also sets out the positive and negative impacts of these regulatory measures on human rights and the rule of law in Nigeria.

    THE LAGOS STATE INFECTIOUS DISEASES (EMERGENCY PREVENTION) REGULATION 2020

    The Lagos State Infectious Diseases (Emergency Prevention) Regulation 2020 was the first government regulation for COVID-19 in Nigeria. It took effect on the 27th of March, 2020. The regulation designates COVID-19 as a dangerous infectious disease, noting that it constitutes a serious and imminent threat to the public health of the people of Lagos State. It grants the Governor power to direct a potentially infectious person within Lagos State to go to a place specified for COVID-19 screening or into isolation. A potentially infectious person is defined as a person who is or may be infected or contaminated with COVID-19 and for whom there is a risk that such person may infect or contaminate other persons within the state. A potentially infectious person under the regulation is also a person who has been in an infected area within fourteen (14) days, preceding arrival into Lagos State.

    Covid19 and Human RightsThe regulation grants the Governor the power to restrict movement within, into or out of the state, particularly the movement of persons, vehicles, aircraft, and watercraft. This restriction may not apply to the transportation or movement for the purposes of procuring essential supplies, such as food, water, medical supplies and medicines, and any other essential supplies the Governor may deem necessary. The regulation grants the Governor the power to restrict or prohibit the gathering of persons without the Governor’s consent, to restrict the conduct of trade, business, and commercial activities within the state, and to order the temporary closure of markets, except those selling or manufacturing essential services.

    The Governor is also empowered to prohibit the hoarding or inflation of the prices of essential goods and services and to direct such goods or services to be seized and utilized to address the supply needs of the state. A breach of the regulation is an offense, liable to a fine or imprisonment or both in accordance with existing laws. The Government of other states such as Rivers, Kaduna, Kano, and Ekiti made similar regulations initiating full or partial lockdown and put in measures to curtail the spread of the Coronavirus.

    FEDERAL GOVERNMENT’S COVID-19 REGULATIONS OF 2020

    On 29 March 2020, the Nigerian President, Muhammadu Buhari, addressed the nation on the Federal Government’s efforts to curtail the spread of COVID-19 within the country. In his address, he directed a cessation of all movements in Lagos State, Ogun State and the Federal Capital Territory for an initial period of fourteen (14) days. Although the cessation of movement in Ogun State was postponed until Friday, 3 April 2020, lockdown in Lagos and Abuja was ordered to commence on Monday, 30 March 2020. This lockdown was to enable the government to track the spread of COVID-19 within these areas. Citizens in these states were directed to stay at home during the lockdown. Inter-state travel within these states was restricted and all businesses and offices within these states were fully closed during the lockdown period.

    Certain businesses were exempted from the lockdown restrictions particularly those providing health-related and essential services, including hospitals and related medical establishments, organisations in healthcare-related to manufacturing and distribution, as well as commercial establishments involved in food processing, distribution, retail companies, petroleum distribution and retail entities, power generation, transmission, and distribution companies and private security companies.

    covid 19 and Human Rights Workers in telecommunication companies, broadcasting, print, and electronic media, who could prove they were unable to work from home were also exempted. Seaports in Lagos state were also exempted as well as vehicles and drivers conveying essential cargoes from the seaports to other parts of the country; cargoes were to be screened before departure by the Ports Health Authority. The President also noted the government’s drive to provide relief materials to communities affected by the restrictions.

    On Monday, 30th March 2020, the President signed the Federal Government’s COVID-19 Regulation of 2020, which declared COVID-19 a dangerous infectious disease and granted a legal basis to the directives stated in the President’s address. The regulation further instituted a moratorium on loans implemented through Bank of Industry, Bank of Agriculture, and the Nigeria Export-Import Bank. Financial and money markets were exempted from the lockdown to run skeletal services and allow Nigerians access to online banking services.

    Critical staff members of the Central Bank of Nigeria, deposit money banks, the Nigeria Interbank Settlement System (NIBSS), mobile money operators, and payment solution providers were also exempted from the lockdown restriction. The lockdown was for an initial period of 14 days after which it was extended for another 14 days, then 7 days, and eventually ceased on 4th May 2020.

    IMPACT OF REGULATORY MEASURES ON HUMAN RIGHTS AND THE RULE OF LAW

    To limit the spread of COVID-19, the Nigerian government took restrictive containment measures, with the effect of curtailing fundamental human rights. These included lockdowns of various states and a cessation of social and economic activity, except those activities relating to essential services. While these measures followed existing public health advisories, they have raised significant constitutional and human rights issues which have had positive and negative impacts, some of which include:

    Questions on the Constitutionality of COVID-19 Regulations

    The Constitution of the Federal Republic of Nigeria 1999 (as amended) provides for the power of the President to declare an emergency, where there is imminent danger or disaster or natural calamity affecting a community, or any other public danger constituting a threat to the country.  A public health emergency of COVID-19 proportions would arguably be considered an imminent danger. Declaration of an emergency in this case would require the passing of a resolution by the National Assembly after the President’s proclamation; otherwise, such a proclamation would expire in 10 days. However, the President chose a different vehicle to impose restrictions.  Instead of passing a proclamation of emergency, which would have required the input of the National Assembly, he issued regulations under the Quarantine Act, a 1926 Law which allows the President to declare a place within the country an “infected local area.”  The President is empowered on the basis of such a declaration to make relevant regulations. Pursuant to the COVID-19 Regulation, 2020, the President required two states – Lagos and Ogun — and the Federal Capital Area to be locked down and prohibited mass gatherings throughout the country.

    In accordance with the Quarantine Act, states can only make regulations where the President fails to do so. It is also important to emphasize that quarantine and labor are “exclusive matters” under the Constitution, and only the Federal Government has the authority to make laws relating to them.  What this meant, in effect, was that states could not make regulations where the President had done so, and if states had already passed regulations, they ceased to have any validity. Nonetheless, some states continued to pass regulations and executive orders. These arguably unconstitutional regulations restricted entry precluded work except “essential services,” and meted out penalties, thus violating the rights of persons to movement and to other rights.  These matters have yet to be brought before the courts, thus there remains a need for clarification either in a judicial decision or in comprehensive public health law.

    Violations of Human Rights

    Several lockdown orders and directives were issued by the government across various states in addition to the Federal Regulations issued by the President. Law enforcement agents, such as the Police and Army were given the task of implementing the orders, directives, and regulations and were empowered to take steps to ensure the restriction of movement. However, most of the orders neither provided the procedure for enforcement nor contained specific actions to be taken by law enforcement officers to implement them.

    This led to several cases of human rights abuse and infringement, as persons who were found violating the lockdown orders were mostly treated according to the whim of particular security personnel or the government. Many were killed; many were arrested and kept in congested cells while many were made to pay a fine or engage in community service before they were allowed to go. As of 14 April 2020, the National Human Rights Commission in its COVID-19 Report on Incidents of Violation of Human Rights stated that it had received 105 complaints on violation of human rights during the lockdown period from 24 out of 36 Nigerian states. The report also stated that law enforcement agents have extra-judicially executed 18 persons while enforcing the regulation at a time when the dreaded COVID-19 had killed only 11 persons. The report further showed that out of the 18

    deaths, the Correctional Service was responsible for 8 deaths; the Police was responsible for 7 deaths; the Army was responsible for 2 deaths while a State Task Force on COVID-19 was responsible for 1 death. Other forms of human rights violations recorded within the period include torture, inhumane and degrading treatment, restriction of movement, unlawful arrest and detention, seizure/confiscation of properties, extortion, sexual/gender-based violence, and discrimination in the distribution of food items.

    Introduction of Virtual Court Hearing

    Covid 19 and Human RightsIn order to efficiently address the question of delayed justice and the right to fair hearing during the pandemic, the National Judicial Council came up with guidelines on COVID-19. According to the National Judicial Council Guidelines on COVID-19, physical court hearings should be avoided as much as possible during the lockdown and must be limited only to time-bound, extremely urgent, and essential matters that may not be heard by the court remotely. According to the guidelines, the courts are to encourage and promote virtual court sittings as an alternative to physical court sessions.

    The guideline further directs that all judgments, ruling, and directions may be delivered and handed down by the courts in and through remote court sittings. With the adoption of the Virtual Court system, came legal arguments as to whether court proceedings conducted using online platforms do not violate the Constitution which provides that legal proceedings must be “held in public”. In a suit filed by two states in Nigeria (Lagos and Ekiti) that had started implementing virtual court hearing, the Nigerian Supreme Court held that Virtual Court hearing is constitutional.

    Decongestion of Prisons

    In an attempt to reduce the exposure of persons in custodial centers across Nigeria to the COVID-19 pandemic, on the 9th of April, 2020, President Muhammadu Buhari granted pardon and clemency to 2,600 inmates of the custodial centers of the Nigerian Correctional Service (NCS). In addition to the President granting 2,600 inmates pardon, the Chief Justice of Nigeria, Justice Tanko Muhammad in a circular dated May 15, 2020, directed all the Chief Judges at both Federal and State High Courts to take urgent steps towards the decongestion of the correctional facilities (prisons). This conforms to the call by the United Nations that countries should consciously reduce the population of prison inmates since physical distancing and self-isolation in such conditions are practically impossible. A vast majority of persons in custodial centers in Nigeria are Awaiting Trial Persons (ATPs), so this is a huge step towards the decongestion of correctional facilities in the country.

    Increased Reporting of Gender-Based Violence Cases

    Nigeria experienced a sharp increase in gender-based violence during the COVID-19 lockdowns.  According to the Inspector General of Police, Mohammed Adamu, from January – May 2020, Nigeria recorded about 717 rape incidents. The Minister for Women Affairs, Mrs. Pauline Tallen, said that the number of abuse cases against women and children had “escalated three times more”, as victims were trapped at home. This led to a public outcry against gender-based violence resulting in state governors declaring a state of emergency on sexual and gender-based violence in Nigeria. The Nigeria Governors’ Forum at its 10th COVID-19 teleconference meeting, condemned sexual and gender-based violence, saying they were committed to ensuring justice was served. It also called on its members yet to implement laws against sexual and gender-based violence to do so in order to reduce the spate of rape in the country. The governors also called on commissioners of police in their states to provide a detailed report on the actions taken to strengthen their responses to rape cases reported to them.

    Increased Use of Alternatives to Imprisonment

    As earlier mentioned, persons in custodial facilities are more prone to the spread of an infectious disease such as COVID-19. Therefore, apart from the decongestion steps taken by the government during the pandemic, the need to adopt other alternative sentencing arose, and this was seen in the handling of breaches of social gathering regulations during the pandemic. The Government deemed it necessary to resort to alternatives in punishing offenders. For example, by the provisions of section 8(1) (a)&(b) and 17 (1) (i) of the Lagos State Infectious Disease (Emergency prevention) Regulation 2020 and under Section 58 Public Health Law Cap P16 Laws of Lagos State, 2015, people found guilty of violating the lockdown order were issued fines and 2 hours community sentencing.

    Conclusion

    There is no doubt the COVID-19 regulations have had a significant impact on human rights and the rule of law in Nigeria. The regulations have raised constitutional questions, occasioned violations of human rights, and brought about some changes in the Judiciary and at correctional service centers. Nevertheless, it is hoped that these identified positives and negatives within Nigeria’s legal framework during the pandemic, will help provide grounds for the Nigerian National Assembly to work towards the enactment of comprehensive public health legislation. A proposed Infectious Diseases Bill aims to further strengthen Nigeria’s public health institute, the Nigeria Centre for Disease Control’s mandate, and clarify the manner of declaring a public health emergency.  However, major concerns relating to the draconian provisions of the Bill amongst other issues have emerged. Given the emerging lessons of the pandemic in Nigeria, entrenching a strong framework of human rights and the rule of law within proposed legislation is an imperative that cannot be ignored.

     

    Written By Collins Okeke (Senior Associate) with research assistance from Kikelomo Lamidi (Associate), Chiemela Iwegbulem (Trainee Associate), Ginika Ikechukwu (Trainee Associate), Ugochukwu Eze (Trainee Associate) and Folake Akinjogunla (Trainee Associate) at  Olisa Agbakoba Legal. 

    Download PDF here.

  • Taxation of Non-Resident Companies with Significant Economic Presence in Nigeria | Olisa Agbakoba Legal

    Taxation of Non-Resident Companies with Significant Economic Presence in Nigeria | Olisa Agbakoba Legal

    Taxation of Non-Resident Companies with Significant Economic Presence in Nigeria 

    The Finance Act 2019 (“the Finance Act” or “the Act”) was signed into law on February 3, 2020. The major aim of the Act is to make the provisions of existing tax legislation more responsive to tax reform. The Act amended the Companies Income Tax Act, Cap C21, Value Added Tax Act, Cap. V1, Customs and Excise Tariff, Etc. (Consolidation) Act, Cap. C49, Personal Income Act, Cap. P8, Capital Gains Tax Act, Cap. C1, Stamp Duties Act, Cap. S8 and Petroleum Profit Tax Act, Cap. P13, Laws of the Federation of Nigeria 2004. 

    One of the highlights of the Act is the introduction of a new tax regime for non-Nigerian companies with a ‘significant economic presence’ (“SEP”) in Nigeria. Section 4 of the Finance Act amended Section 13(2) (c), (e) and (4)of the Companies Income Tax Act and empowered the Minister of Finance to, by order; determine what constitutes the significant economic presence of a company other than a Nigerian company.

    In exercise of the above powers, the Honourable Minister of Finance, Budget, and National Planning made the Companies Income Tax (Significant Economic Presence) Order, 2020 (“the Order”).

    The Order sets out, among other things, the criteria for determining non-resident companies with significant economic presence.

    Significant Economic Presence as Basis for Taxation of Foreign Companies

    Section 13(2) (c), (e) and (4) of the Companies Income Tax Act(“CITA”) as amended by Section 4 of the Finance Act provides as follows:

    “The profits of a company other than a Nigerian company from any trade or business shall be deemed to be derived from or taxable in Nigeria:

     (c) if it transmits, emits or receives signals, sounds, messages, images or data of any kind by cable, radio, electromagnetic systems or any other electronic or wireless apparatus to Nigeria in respect of any activity, including electronic commerce, application store, high-frequency trading, electronic data storage, online adverts, participative network platform, online payments and so on, to the extent that the company has a significant economic presence in Nigeria and profit can be attributable to such activity;

    (e) if the trade or business comprises of furnishing of technical, management, consultancy or professional services outside of Nigeria to a person resident in Nigeria to the extent that the company has a significant economic presence in Nigeria;

    Provided that the withholding tax income under this paragraph shall be the final tax on the income of a non-resident recipient who does not otherwise fall within the scope of subsection (2) (a)–(e).

    (4) For the purpose of subsection (2) (c) and (e), the Minister may by order, determine what constitutes the significant economic presence of a company other than a Nigerian company.”

    In the light of the foregoing, the Companies Income Tax (Significant Economic Presence) Order, 2020 (“the Order”) provides that for the purpose of the above provisions of CITA, a non-Nigerian company shall have a significant economic presence in Nigeria where it derives gross turnover or income of more than ₦25 million or its equivalent in other countries, in that year, from any or combination of the following – 

    “(i) streaming or downloading services of digital contents, including but not limited to movies, videos, music, applications, games, and e-books to any person in Nigeria,

    (ii) transmission of data collected about Nigerian users which have been generated from such users’ activities on a digital interface including website or mobile applications,

    (iii) provisions of goods or services… directly or indirectly through a digital platform to Nigeria, or

    (iv) provision of intermediation services through a digital platform, website or other online applications that link suppliers and customers in Nigeria”;

    In determining the ₦25 million thresholds above, the activities of connected persons shall be aggregated. The Order defines “connected persons” to mean associates or business associates where one person is involved in the management, control or capital of the other or where same person or persons are involved in the management, control or capital of both enterprises.

    taxation of non-resident companies in NigeriaThe Order also provides that where a non-resident company uses Nigerian domain name (.ng) or registers a website address in Nigeria; or has a purposeful and sustained interaction with persons in Nigeria, including reflecting the prices of its products and services in Nigerian currency or providing options for billing or payment in Nigeria currency, such company will be deemed to have a significant economic presence in Nigeria.

    Furthermore, a non-resident company will be deemed to have a significant economic presence in Nigeria if the company provides technical (including advertising services, training, and provision of personnel), professional, management or consultancy services in return for payment to a person resident in Nigeria or to a non-Nigerian company with a fixed base or agent in Nigeria except where such payment is made to an employee of the person to whom the services are rendered under a contract of the employee as well as payments made for educational purposes or by a foreign base of a Nigerian company. 

    The Order defines “any other electronic or wireless apparatus” as used in Section 13(2)(c) of the Finance Act to include digital or related activities carried on through satellite.

    Implications of this New Tax Regime

    In the light of the foregoing, non-resident companies with SEP are now required to register for income taxes, prepare financial statements in respect of the income generated from Nigeria; determine the profits that are attributable to their activities in Nigeria, and file annual tax returns to the Federal Inland Revenue Service (“the FIRS”) as provided by CITA. On the other hand, Nigerian companies are now required to deduct withholding tax (“WHT”) from payments made for services provided by non-Nigerian companies. 

    Additionally, the Order provides that foreign companies covered under any multilateral agreement to which Nigeria is a party or any consensus arrangement aimed at addressing the tax challenges arising from the digitalization of the economy will be treated in accordance with such agreement or arrangement from the effective date in Nigeria.

    taxation of non-resident companies in NigeriaThis is noteworthy since Nigeria is a member of the Organization for Economic Co-operation and Development’s Inclusive Framework on Base Erosion and Profit Shifting (“the OECD Framework on BEPS” or “the framework”). Thus, the government recognizes that an agreement may be reached under the framework on a unified approach for the allocation of taxing rights and profits pertaining to SEPs. 

    However, the framework’s current unified approach will only apply to groups with annual revenues above €750 million ($840 million). Also, even where this threshold is met, a group may still be excluded from the scope of the approach if its profit margins are below a threshold which is yet to be determined. The implication of the foregoing is that many non-resident groups that do not qualify to be taxed under the current unified approach may continue to be taxed under the extant SEP Order and the applicable rules.

    It is therefore advisable for non-resident companies who wish to rely on any tax treaties or consensual arrangements including the OECD Framework on BEPS, to engage FIRS in this regard, to claim benefit under such arrangement.

    Challenges to the Taxation of Non-Resident Companies with Significant Economic Presence in Nigeria 

    The first challenge to be noted with respect to this tax regime is that while the Order was published on 29 May 2020, the effective date is 3 February 2020 which is the effective date of the Finance Act, having been signed by the President of Nigeria on that day. The implication of this on transactions and/or payments carried out before 29 May 2020 is still unclear. It is expected that the Minister and/or FIRS will issue a circular to provide guidance in this regard.

    It is also not clear how the FIRS intends to enforce this Order with respect to non-resident digital companies. While Nigerian customers of such companies may be expected to make withholding tax (“WHT”) deductions and remit to FIRS; FIRS may yet issue a circular to this effect.

    Moreover, neither the Finance Act nor the Order states how to determine the amount of profits of a foreign digital company that will be taxed. While the OECD public consultation document, of 13 February 2019 on Addressing the Tax Challenges of the Digitalisation of the Economy, contemplates that only a portion of the profits from the transaction should be taxed in the jurisdiction where the non-resident company has significant economic presence, it is not yet settled whether this can be applied in Nigeria in view of the arm’s length principle of profit attribution provided in the Income Tax (Transfer Pricing) Regulation 2018 and other relevant legislation, and reemphasized by the Tax Appeal Tribunal in the case of Prime Plastichem Nigeria Limited v. Federal Inland Revenue Service, Appeal No.: TAT/LZ/CIT/015/2017, judgment delivered on 19 February 2020. Thus, fractional apportionment of profit may only apply to companies with SEP, if new legislation or guideline is introduced to allow such method of determining taxable profit.

    In practice, when FIRS is unsure about the taxable profits of non-residents, an assessment is based on a percentage (usually 6%) of the Nigerian sourced turnover. It must however be noted that companies with SEP are not included in the categories of non-residents that can be taxed in this manner. Nevertheless, FIRS can still employ this method of taxation, relying on sections 30 and 65 of CITA that allows FIRS to tax companies using the best of judgment assessment.

    Conclusion

    Non-resident companies with a customer base in Nigeria are advised to consider how this new tax regime affects them. While we await clarifications from FIRS on the gray areas pointed out above, affected companies may, in the meantime, engage FIRS on these issues. This will help to avoid disputes and possible double taxation. Nigerian companies are also advised to consider deducting WHT from payments made to non-resident digital companies in view of this new tax regime.

    Non-resident companies with SEP in Nigeria are also advised to bear in mind the provisions of relevant treaties and arrangements that may affect their tax liability when negotiating agreements. Both resident and non-resident companies are advised to seek expert opinion on specific issues that may affect them.

    Written by: Ifeatu Medidem (Senior Associate) and Ugochukwu Eze (Trainee Associate), Olisa Agbakoba Legal

  • Sports Betting and Consumer Protection in Nigeria | Olisa Agbakoba Legal

    Sports Betting and Consumer Protection in Nigeria | Olisa Agbakoba Legal

    Sports Betting and Consumer Protection in Nigeria – an article by Olayinka Suara – Associate (Sports, Entertainment and Technology Practice) Olisa Agbakoba Legal

    The Nigerian sports betting and gaming industry has grown astronomically in the last few years. According to Business Wire, there are 60 million Nigerians between the ages of 18 and 40 who are involved in active sports betting, and the sports betting market in Nigeria is estimated at $2 billion.

     This exceptional growth can be attributed to the growing /popularity trend/interest in betting in the country, especially the number of youths, given increased access to digital telephones, successful internet penetration and increased access to internet-enabled devices coupled with having the youngest population of under 30 in Africa, the ingredients for its extraordinary success is perhaps not surprising.

    “So what exactly is sports betting? The definition of sports betting” is, placing a financial wager on the outcome of a sporting match, as well as on events that occur within the larger match or fixture.  In Nigeria, the number of sports betting companies offering a variety of styles and formats seems to be growing faster.

     

    Some of the popular betting platforms in the country include; Naijabet, Nairabet, Betway, Bet9ja, Sportybet, Merrybet, etc. Typically, all the aforementioned betting companies create an open platform for prospective punters to place bets and predict the outcome of a game usually in sports though it need not be restricted to sports e.g. Fans that predict correctly are rewarded and those whose predictions were wrong to lose their monies. This is fast becoming the order in Nigeria, as fans that are “fans enough” go a step further to “stake” on the higher level of fandom and expertise in the football understanding.

    Sports’ betting is a big business globally, much so, it is now taxable and regulated as a legitimate business (Requirement of Online Sports Betting in Lagos 2015; National Sports Policy of Nigeria 2009). For instance, according to Statistical Portal (2015), even though it may be difficult to accurately estimate the total value of global sports betting, due to the inconsistency in the regulatory and financing environments, responsible surveys estimate the value of sports betting industry at around 700 billion U.S. dollars and 1.000 billion U.S. dollars, while in fact the illegal betting only might be as a high as 500 billion U.S. dollars.

    Some bookmakers have speculated that the sports betting industry is now worth over one trillion U.S. dollars. It is also worth noting that any figure on the process of betting is merely indicative of the official gambling. Most gambling activities are undocumented and operate at the informal levels amongst friends, colleagues, spouses, relatives, and even enemies, and could be worth as much as billions of U.S. dollars globally. 

    Generally, online gambling is a fast-growing business with an estimated annual growth rate of 12%, according to Global Betting and Gaming Consultants (2011), and this is driven by globalization and technology.  In the United States, asides from the states of Nevada who have had Sports betting Laws enacted since 1949, all other states have recently introduced laws to enable sports betting for the first time save for three( Idaho, Wisconsin, and Utah). Countries like the UK, Canada, Kenya, Ghana, South Africa, etc. also have laws regulating sports betting and it is entirely legal in these countries.

    Sports Betting/ Gambling Regulations in Nigeria

    Gambling in Nigeria is regulated by the National Lottery Regulatory Commission (NLRC).  The lottery was legalised by the National Lottery Act, 2005, and regulation of gambling and betting activities is provided for in Chapter 22 of the Criminal Code Act enacted in 1990. The law splits the games into two categories: The legal and illegal games. The legal games are lottery, land-based casino, and sports betting. Roulette, dice games, and non-skilled card games on the other hand are illegal. 

    It should be noted that online sports betting games are permissible, however, according to sec 2(b) the National Lottery Regulations, 2007, adverts must adhere strictly to government policies on social responsibility in designing, advertising, and marketing campaign as relates to an advertisement.  It must also conform to the Nigerian Code of Advertising Practice made pursuant to the Advertising Practitioners (Registration etc) Act.

    The Consumer Protection Council Act (1992 No. 66) Consumer Protection (Sales Promotion) Regulations 2005

     

    The laws and regulations governing gambling in Nigeria can be a little confusing because there is no cut and dried law or legislation that solely addresses gambling in Nigeria. Instead, there are two Acts that make reference to gambling in terms of what is illegal or not allowed, and what is legal and allowed.

    Apart from the Criminal Code Act, over the years, other laws have been passed to regulate sports betting in Nigeria, they include; 

    • The Gaming Machines (Prohibition) Act of 1977
    • Criminal Act
    • National Lottery Act 2005
    • National Lottery Regulations 2007 (as amended)
    • Lagos State Lotteries Law 2004 (applicable only in Lagos State) among various lotteries laws in other states.

    Government Agencies Regulating Gaming in Nigeria

    • National Lottery Regulatory Commission (NLRC)
    • Lagos State Lotteries Board (LSLB)
    • Other State Lotteries Boards

    Consumer Protection in Sports Gambling

    Consumer protection is important and necessary for the growth of any industry. It assures the Consumers of any service or commodity, that their interests are safeguarded from unfair practices. The interests of the consumers within the sports betting industry are protected by the regulatory agencies as stated above.

    Agencies who also have the mandate to protect the rights of consumers are the Federal Competition and Consumer Protection Commission (FCCPC) and the Competition and Consumer Protection Tribunal (CCPT) The FCCPC and the CCPT are agencies of the Government under the supervision of the Federal Ministry of Trade and Investment, whose powers are derived from the Federal Competition and Consumer Protection Act, 2018. These two agencies are at present, the most powerful consumer redress and monitoring agency in Nigeria.

    The FCCPC has wider investigative and enforcement powers whilst the CCPT on the other hand acts as a quasi-judicial body to which appeals from the decisions of the FCCPC and decisions of any sector specific regulatory authority in a regulated industry in respect of consumer protection matters will lie.

    Furthermore, the Act stipulates a very steep penalty for contraventions. For instance, where there has been a contravention of any consumer rights, it stipulates a fine of 10% of the turnover of the business in the preceding business year.

    In Nigeria, the conditions under which bettors place bets leave them without the protection that is available to other consumers in other industries in the economy especially in situations when consumers win huge sums of money. It is important to distinguish the two alternative and complementary legal routes to consumer protection. The first — the private — makes available a legal remedy to individual consumers who have experienced a breach of the terms of a contract (whether those terms have been imposed by statute or common law). By signing and agreeing to the terms of use of a betting company, a bettor automatically enters into a contract with a betting company.

    The enforceability of contracts in Nigeria means that the courts and/or regulatory bodies will approve remedies to bettors who suffer loss in consequence of the conduct of the betting company. Furthermore, regulatory bodies are given the power to exact, through the courts, financial remedies from bookmakers in favour of identifiable bettors in consequence of the former’s breach of specified standards. 

    The second route to consumer protection is the public. The public imposes on the supplier of a service certain duties with which he or she must comply with. A detected breach may lead to societal backlash and as a result, loss of revenue and patronage. This approach typically involves leveraging public patronage and sympathy to protect consumers who have been treated unfairly by betting companies.

    It is worthy of note to state that the terms and conditions that underpin a game of skill and chance between the players and company are basically contractual, however, they have to conform to regulations and laws of the country. For instance, a proposed betting or lottery company must obtain an appropriate license from NLRC before it can commence operation.

    The financial requirements of obtaining a license include; registering a company with a minimum share capital of N30, 000, 000( Thirty Million Naira); An Application fee of N2, 000, 000 (Two Million naira), Permit Fee of N100, 000, 000(One Hundred Million Naira), however where the company is a member of the Association of Nigerian Bookmakers, a 50% concession is granted; and finally, a Bank Guarantee of at least N25, 000, 000 (Twenty Five Million Naira) must be provided. The Terms and Conditions of any betting company are also subject to the approval of regulators. The NLRC, as well as other State’ Lotteries Board and other regulatory bodies, have a huge role to play to protect consumers.

    Evidently, the sports betting market, particularly, consumers need to be aware of their rights whenever they feel it is being infringed upon or they are being treated unfairly by Sports betting companies. Many bettors have been treated unfairly and have buried these issues under the carpet. However, with more awareness, many bettors can seek redress and protect their interests through regulatory bodies and regulations targeted at protecting consumers.

  • Avoiding or Mitigating Recession in Post-COVID Nigeria | Olisa Agbakoba Legal

    Avoiding or Mitigating Recession in Post-COVID Nigeria | Olisa Agbakoba Legal

    Avoiding or Mitigating Recession in Post-COVID Nigeria – an article by Dr Olisa Agbakoba (SAN)

    The massive macro-financial shock caused by Covid-19 has continued to ravage the global economy putting all systems and nations under severe financial instability never seen in history. Stock Markets around the world have been pounded and ravaged, and oil prices have fallen to an all-time low. Nigeria is not spared from this crisis.

    Total revenue expected to be realised from the 2020 National budget was N8.42trillion. However, following the Covid-19 pandemic, revenue projection was reduced to N5.16trillion. This represents a drop of close to 40% or N3.26trillion. Key sectors like manufacturing, maritime, aviation, hospitability and the creative industry, collapsed resulting in huge financial and job losses.

     

    The first-quarter report of the Nigerian Bureau of Statistics (NBS) shows a slow-paced growth of -0.68% as GDP contracted by 1.87% when compared to the fourth quarter of 2019. If this continues into the second quarter there are ominous signals of an impending recession. The World Bank 2020, Global Economic Prospects, June 2020, forecast that the COVID -19 pandemic will plunge all countries into the worst recession in history.

    The GDP of advanced economies is projected to shrink by 7 per cent. The outlook for emerging market and developing economies is bleak as they are forecast to contract by 2.5 per cent.

    This would represent the weakest showing by this group of economies in at least sixty years. The crucial issue is – How do we avoid and or minimize the impact of an inevitable recession on our economy?

    The first and critical policy action is to harmonize fiscal and monetary policy.  Fiscal policy must be expansionary. In other words, big spending is required to massively stimulate the economy. This is called Keynesian economics named after the economist John Maynard Keynes.  Keynesian economics served as the standard economic model in the developed nations during the latter part of the Great Depression, World War II, and the post-war economic expansion (1945–1973).

    American President, Franklin Delano Roosevelt used the Keynesian economic model by spending massively on public works programs to get America out of the great depression. The mantra for Nigeria is to spend big to get out of recession. We acknowledge the government has adopted an expansionary policy by borrowing massively but we must have a clear strategy. First, we must determine our Public Sector Borrowing Requirements (PSBR). Additionally, we will need to identify an inventory of Public Sector Spending Requirements (PSSR). The PSBR and the PSSR should be indexed to identify funding gaps.

    Additionally, an inventory of government assets should be created as we have many wasting assets that can be converted to cash. Using the abandoned Federal Government Secretariat in Lagos as the index case, informed valuers believe it has a forced market value of N100 Billion. This can build the East-West Road. Abandoned projects abound, Ajaokuta Steel, Aladja Steel, the Newsprint at Iwopin, the various steel rolling mills around the country, the Onitsha Port, etc.

    It is believed these assets are worth at least N15, Trillion yet untapped. These wasting assets, if sold will boost fiscal policy immensely. Turning to Monetary Policy, we clearly need a very flexible monetary policy with interest rates pegged at no more than 5% (Single-digit) to create a framework for quantitative easing and open market operation (OMO).

    Quantitative easing (QE) makes borrowing easy for business. QE makes the burden on business lighter. OMO flood the economy with liquidity.  A harmonized fiscal and monetary policy will lay the foundation to rebuild the economy.  Three requirements to avoid a recession are Job creation, revenue mobilization and control of the cost of governance.

    If we get the macroeconomic environment right, which is the alignment of fiscal and monetary policy, it will release economic energy to create Jobs estimated at between 5 and 6 Million, year on year. With respect to revenue generation with the right framework, massive funds can be generated and pumped into the economy.

    With respect to cost of governance, everybody knows it is far too high. In the revised 2020 budget, 73.5% of total expenditure are for salaries and debt servicing, while only 26.5% are for capital expenditure.  This is unsustainable. We cannot continue to borrow to pay high recurrent bills. Rather we must invest in capital expenses to reflate the economy. The Government has taken steps to implement the Orosanye report but there needs to be a timeline for implementation.

    Corruption is a leading cause of high cost of governance. It is important to review anti-corruption strategies to reduce public corruption. Tackling the menace of big government and public corruption will give us more balanced revenue to debt profile. With the macroeconomic framework highlighted above, we can now review some critical factors that can help grow the economy and avoid recession.

    Diversification of the Economy

    This is one area the government needs to urgently activate because of the massive budget deficit. Nigeria runs a mono-cultural economy as 85% of her revenue is derived from crude oil exports.  As a result of the price shocks occasioned by COVID – 19, crude oil receipts have gone down and are no longer able to sustain the economy.

    The total revenue expected to be realised as stated in the 2020 budget is N8.42trillion, including a deficit of N2.17t. However, following the COVID -19 pandemic, fiscal deficit has grown from N2.17t to N5.37t, which must expectedly be financed by fresh borrowing. We are now running a deficit budget and borrowing massively.

    Unless we diversify the economy, we will continue to borrow to the point where it becomes unsustainable. Many governments have paid lip service to diversification, but this is the time to develop a very strong policy on diversification. We must follow the example of the United Arab Emirates which diversified their economy by reducing dependence on oil receipts from100% to only 35% by going into service and smart industries.

    Some of the sectors to diversify our economy are;

    Agriculture

    Agriculture is one of the largest contributors to Nigeria’s GDP and has the potential to create massive numbers of new Jobs, especially in Northern Nigeria that has very fertile agricultural land. But our policy on agriculture must move away from subsistence to mechanized agriculture.

    The Central Bank of Nigeria’s Anchor Borrowers programme that made Nigeria self-sufficient in rice production has shown the potential of the Agriculture Sector. The Central Bank has identified 10 crops to support namely rice, wheat, milk, tomato, fish, cotton etc. This is a great leap forward for the sector. Mechanized Agriculture will not only create Jobs but also improve National Security by offering employment to our teeming youths exploited for banditry and terrorism.

    Transportation

    This is a massive sector that can create millions of jobs and billions in revenue. But the starting point is to have a cohesive multi-model transportation policy to take care of the 4 critical sectors of air, sea, road, and rail. Once there is an effective transportation policy it will impact each of the 4 sectors in the following ways:

    Aviation/Space

    Aviation is a major transportation sector. Unfortunately, Nigeria has no presence in the international Aviation business. Nigeria Airways has long been comatose. Foreign aircraft dominate the Nigerian airspace and earn well over 2 trillion Naira annually to our exclusion. 2 trillion Naira is substantial in our national budget. A Fly Nigeria Act will ensure that public funds to purchase air tickets must originate and fly on a Nigerian carrier. The Fly Nigeria Act will create an instant market of goods, passengers and services for our national carrier. Jobs will be created and revenue generated to the advantage of the economy.

    Space technology is huge. The late English theoretical physicist and cosmologist, Stephen Hawking referred to space as the future of mankind.  Regrettably, Nigeria is not harnessing this sector.  Space has many major applications for developing our economy. We will mention two examples. First, space can be applied to the energy sector as remote sensing establishes the quantum of our hydrocarbons. Second,  is the link between space and national security. Satellite technology intelligence gives us vital footprints in the national security infrastructure. The growing threat of terrorism and the adverse impact on economic stability can be checked by intelligence provided by space satellites. Nigeria has no space legislation. This hurts economic transformation.

    Railway and Road Transport

    The opportunities for rail and road are unimaginable.  They connect people and open markets so goods and services are exchanged. Government is investing heavily in this sector but a lot more investment is required. The CBN recently launched InfraCo, a $39 Billion (N15 Trillion) infrastructure development fund but N15 Trillion is not enough. Rail and roads need a lot more investment because its revenue and job potentials are huge.

    The Post-COVID economy must create what is called socialized jobs. American President, Franklin Roosevelt used social jobs to push America out of the Great Depression, by creating the Tennessee Valley Authority and employed over 4 million people. To accomplish all these, a strong Public-Private Sector Partnership (PPP) is vital.

    Maritime

    This sector has been completely ignored but it has the capacity to generate over Seven Trillion Naira annually and four million jobs over 5 years.  All that is required is the implementation of local content and Cabotage rules especially relating to the oil and gas sector which is currently dominated by foreigners.

    Our Cabotage legal regime must be enforced to stem capital flight and boost capacity for Nigerian Shipowners. Several critical bills relating to the maritime sector pending before the National Assembly require immediate enactment and implementation. Some of the bills are the Petroleum Industry Bill (PIB), the Ports and Harbour Bill, Maritime Zones Bill, Ocean Bill etc.

    There is also an urgent need to review the Nigerian Shipping Policy Act of 1987. The enactment of a law on maritime zones is also long overdue. The Maritime Zones bill will extend Nigeria’s EEZ of 200 nautical miles by another 150miles. This will create massive new revenue streams and generate jobs in the maritime sector.

    Hydrocarbons and Solid Minerals

    Although oil receipts are down, our huge gas reserves present opportunities for alternative revenue sources. Russia’s revenue from gas exports in 2017 was $ 38.1 Billion. The success of Nigeria’s LNG has demonstrated that gas revenue is massive but only if exploited.  Nigeria can also derive revenue from petrochemicals like methanol which Nigeria currently imports. But the legal framework must be right.

    The legal framework relating to hydrocarbons is skewed in favour of foreign companies in the entire value chain. In at least four cases, banking, insurance, shipping, legal service, capital flight is massive. In relation to shipping alone, it has been suggested that Nigeria loses over 10 Billion Dollars annually. Revenue loss will continue unless the legal framework is amended to domesticate the value chain in hydrocarbons.

    avoiding recession coivd 19

    It is important to review the legal framework for local content with a view to strengthening implementation and enforcement. It is also very important to address the issue of corruption in the extractive industry. The continuing lapses and loss to the nation in oil and gas revenue as revealed in the Report by Nigerian Extractive Industries Transparency Initiative, NEITI, which indicate a lack of implementation of previous reports, supports this. To ensure speedy reforms in the oil & gas sector, the Petroleum Industry Bill has to be passed into law. Our hydrocarbon resources especially gas is absolutely a major source of revenue and employment.

     

    Solid mineral is another sector that has not been adequately harnessed. Nigeria is estimated to have about 34 solid minerals, with every Nigerian state boasting of at least one of these minerals. This can generate $ 10 Billion and 5 million Jobs. The Democratic Republic of Congo in 2017 alone saw the sector generate $ 1.68 billion, accounting for 55.16% of the total government revenue and 17.40% of the GDP. Solid minerals are undoubtedly capable of making a more pronounced impact on the country’s employment rate and generating more revenue for the government, however, to derive the highest possible benefit from this sector, a proper policy and legal framework needs to be put in place.

    Information Technology

    Nigeria can leverage its status as a multi-billion-dollar tech hub to develop its IT sector and become a global IT services destination. Github, a leading software development platform, recently reported that Nigeria is home to the fastest-growing developer community on its platform. The country has benefited from companies like Andela which brought world-class training and job opportunities to budding Nigerian programmers. Gebeya is promoting a similar model of training the next generation of African developers. Nigeria’s growing supply of programmers will likely be met with rising demand from the country’s constantly expanding tech hubs.

    The potential of the business-to-business (B2B) or enterprise software sector is also good news for the country’s ITC sector. African companies are expected to spend $3.6 trillion on B2B services in 2025. Nigeria is well-positioned to be part of this growth given the coexistence of traditional industries and B2B tech startups. The combination of a growing local talent pool and a bustling B2B sector means that the IT sector can drive economic growth for decades to come.

    Entertainment

    Nigeria’s entertainment industry already plays an important role in the Nigerian economy but its full potential remains untapped. The industry was projected to generate $1 billion in export revenues this year and bring in crucial foreign currency. The industry has an added benefit over the natural resource sectors since entertainment products are non-rival goods.

    This means that the local consumption of a movie or a song, for example, does not prevent the export of that same song to international markets. This allows Nigerian entertainment products like songs, movies, and books to generate wealth indefinitely. The entertainment industry drives job growth and employs millions of Nigerians in complex value chains.

    Nollywood, Nigeria’s film industry, produces an average of forty films a week and directly employs 300,000 Nigerians. Nigeria’s upcoming fashion industry is perhaps the best example of old value chains meeting new ones: designers are using local cotton to create garments being modelled at international fashion weeks. The fashion industry directly employs and benefits farmers, distributors, designers, and more.

    Trade policy

    Nigeria has no trade policy which is why it is a major dumping ground for foreign goods. We spend billions of dollars importing basic food commodities that can grow locally. We must grow what we eat.  We need to reverse this with robust trade policy. Trade policy refers to the rules and regulations on imports, exports, tariffs, duty etc. Trade policy rests on a tripod of critical factors – import substitution, tariffs, border enforcement and compliance.  We need to enact trade remedies legislation and a trade Expansion Act.  This legislation will impose anti-dumping duties on non-essential products. There are also special duties and measures we can impose on exports into Nigeria which are subsidized by a foreign country.

    The trade remedies legislation will prohibit imports if it is adjudged that they will cause material injury to local industries, for example by impeding local growth.  It is also important to enact legislation that will support the recently established Nigerian Office for trade negotiation (NOTN). It is crucial that the office is elevated to ministerial level.  We need to establish a National Customs and Border Enforcement Services.

    This Border Enforcement Services will need new legislation to merge immigration and customs services. The Border Enforcement Service will replicate the US Customs and Border Enforcement Agency. The merged service will reduce duplication and proliferation of agencies at the borders. To comply with the ECOWAS protocol and the African Continental Free Trade Agreement (AfCFTA), the border closure policy should be replaced by a border enforcement policy. Strong trade policy will help create millions of jobs, grow local industries and expand the economy.

    Access to Capital

    Capital is the oxygen and lifeblood of the economy. One of the areas where we can tap into capital is the Housing/property market. Eighty per cent (80%) of Nigeria’s businesses rely on land and housing as collateral. Unfortunately, the slow administration of the Land Use Act in terms of consents and permits has meant that the banks have not accepted untitled property as collateral. This has caused incalculable damage to businesses in need of capital.

    avoiding recession post covidA recent study shows that the housing inventory of Nigerian property exceeds six trillion dollars. Nigerian property and the housing market is dead capital because 80% of them have no title or bad title and therefore not good as collateral for bank loans.  So creating the proper legal framework to make dead capital fungible (easily transferable) will create an instant credit market and enable Nigerians to borrow on their property.

    A Land Use Administration Act will introduce new rules to make the consent process more efficient and give confidence to banks to accept title documents as collateral. This process will create an instant credit market to drive the economy and will easily contribute at least 5% to GDP.

    Government Stimulus Intervention

    Because of Covid-19, the economy has taken a very big knock. It is the responsibility of government (like most western countries) to reboot the economy by supporting businesses with a business support fund of at least 50 trillion. We applaud the government for the injection of funds to support the economy. We note the following:

    • Nigeria Economic Sustainability Plan (NESP), 12-month, 2.3 Trillion Naira ‘Transit’ Plan between the Economic Recovery and Growth Plan (ERGP) and the successor plan to the ERGP
    • Ministry of Trade and Industry, MSME Survival Fund, The Guaranteed Off take Stimulus Scheme and the Credit Support to MSMEs and Priority Sector and
    • Central Bank of Nigeria N10 billion loans and grants approved for various groups and organisations for pharmaceutical and healthcare-related research, under the COVID-19 intervention scheme.
    • The Special Public Works programme expected to engage 774, 000 Nigerians to cushion the effect of COVID-19 pandemic.

    It is a good start but not enough. The Government should look to ways and means by the CBN to inject at least 50 trillion into the economy. The government can intervene through a National Credit Guarantee Agency to support viable business proposals so they Business can easily access credit. Major economies of the world run on credit. The key is that the creditor is assured that he will be paid by a government guarantee. Another key institution is the Development Bank (DBN). Nigeria has a Development Bank but unfortunately undercapitalized. The DBN needs to be properly capitalized to boost the economy.

    Enabling Business Environment

    The factors listed above will not work without an enabling business environment. The first step is to have an efficient legal and regulatory system.  For instance, the Nigerian judicature is based on the 1875 Judicature Act. The consequence is that cases take too long to resolve. It takes between 5 to 20 years to resolve simple contractual disputes. Investors, both local and international,  will not invest in a country where simple contractual disputes take between 5 to 20 years to resolve.

    We must give urgency to this sector and reverse legal failure. A speed of justice policy will reduce delays. In this regard, the National Assembly must consider enacting the Administration of Civil Justice Bill to ensure efficient administration of civil disputes.  Also, new methods of dispute resolution should be considered such as Alternative Dispute Resolutions, small claims courts, traditional and customary arbitration. Quasi-judicial administrative tribunals can be established for sectors, following the UK example.

    In England, there are many administrative courts for Telecommunications, Taxation, Transportation, Insurance, Education, Financial Services, Trade, Investments, etc.

    Finally, the Nigerian legal and regulatory framework must be reviewed and structured to create an enabling environment that can support the development of a digital economy. Enactment of the Company and Allied Matters Bill will be an important step to improve the business environment for entrepreneurship and to provide greater clarity for investment funds.

    Once enacted, it will be important to develop regulations to support the Companies and Allied Matters Bill and other relevant recently passed legislation, such as the Secured Transactions Act, to ensure effective implementation. Additionally, there should be a review of legislation impacting digital entrepreneurship including the following:

    1. The Intellectual Property Policy and Legislative framework
    2. Cybercrime Prevention Act
    3. The Venture Capital Incentive Act

    The Tax incentives system akin to the pioneer tax system is needed to ensure that the regulatory environment is investment friendly rather than an impediment to the growth of the economy.

    Discipline of Execution

    Nigeria has a plethora of laws, regulations, guidelines and Executive Orders. The challenge is the lack of implementation of these laws and regulations. Unless rules are enforced, Nigeria will not easily overcome the recession. Vigorous government policy is needed to implement diversification, strong trade policy and access to credit etc. There needs to be timelines and harmonization of work of the various government agencies ministries. Nigeria can generate 10 million Jobs and over N100 trillion with full compliance with policy implementation. This will help to mitigate the impact of the impending recession. The President must take charge and ensure vigorous implementation.

    Conclusion

    The story about diversification of the economy is an old argument going back 30 years and in fact, the Nigerian economy is actually diverse but the problem is lack of government consistency which has meant that although we have diversity, no revenue flows out.  We can only succeed if the twin administrative tools of power of focus and discipline of execution are applied. This presentation is made from the point of view of a development lawyer. It is up to the economists to draw what they can to mitigate the impending recession.

    Written By – Dr Olisa Agbakoba SAN (Senior Partner, Olisa Agbakoba Legal)

               

  • Executive Order 10, 2020 – Motion Without Movement | Olisa Agbakoba Legal

    Executive Order 10, 2020 – Motion Without Movement | Olisa Agbakoba Legal

    On Friday 22nd May 2020, the Nigerian President signed the Presidential Executive Order No. 10 of 2020, which is the Financial Autonomy of State Legislature and State Judiciary Order 2020. The purport of Executive Order No. 10 of 2020 is, as the name suggests, to provide for financial independence of the Judiciary and Legislature of the 36 states of the Nigerian Federation. It is therefore surprising that the Executive Order No. 10 of 2020 is being celebrated as having ‘granted’ financial independence to the judicial and legislative arms of the state governments.

    Executive Order 10The fact actually is that the Executive Order No. 10 of 2020 did not grant financial independence to the states’ legislature and the judiciary, because the financial autonomy of the judiciary and legislature at both the Federal and State levels are already provided for by the Constitution. Unfortunately, it is being breached by Federal and State Executives, and the Judiciary having no control over funds automatically becomes the most vulnerable and the biggest victim at both the Federal and State levels.

    An examination of Part E of the 1999 Constitution of the Federal Republic of Nigeria (the Constitution) relating to powers and control over public funds, will show the constitutional effort to guarantee and secure independent funding of the Judiciary, free from Executive interference and control. Sections 80, 81 and 84 of the Constitution, in particular, give the Judiciary power and control over its own funds.

    While Section 80 of the Constitution establishes the Consolidated Revenue Fund of the Federation as a pool of national income, Section 80(2) stipulates how monies are withdrawn from the Consolidated Revenue Fund of the Federation. In the words of Section 80 of the Constitution “No moneys shall be withdrawn from the Consolidated Revenue Fund of the Federation except to meet expenditure that is charged upon the Fund by this Constitution or where the issue of those moneys has been authorized by an Appropriation Act, Supplementary Appropriation Act or an Act passed in pursuance of Section 81 of this Constitution. In essence, Section 80(2) approves only 2 ways money can lawfully be withdrawn from the Consolidated Revenue Fund, namely: by direct charge upon the fund, and by appropriation.

    Part of expenditure charged upon the Consolidated Revenue Fund of the Federation relating to the Judiciary. This is seen at Section 84(4) of the Constitution which described judicial officers as including Chief Justice of Nigeria, Justices of the Supreme Court, President and Justices of the Court of Appeal etc and also Section 84(2) which orders as follows:

         “The remuneration, salaries and allowances payable to the holders of the offices so mentioned shall be a charge upon the Consolidated Revenue Fund of the Federation”.

    For emphasis and clarity, the Constitution, at Section 84(7), stipulates as follows:

        “The recurrent expenditure of judicial offices in the Federation (in addition to salaries and allowances of the judicial officers mentioned in subsection (4) of this section) shall be a charge upon the Consolidated Revenue Fund of the Federation.

    To further make it clear that the Constitution wants the Judiciary to be financially independent of the Executive and the Legislature, Sections 81(1) and 81(2) unambiguously exempted all expenditure charged upon the Consolidated Revenue Fund of the Federation from the second mode of withdrawal from consolidated Revenue Fund which is by appropriation, as shown below:

    • 81(1)  The President shall cause to be prepared and laid before each House of the National Assembly at any time in each financial year estimates of the revenues and expenditure of the Federation for the next following financial year.

     

    • 81(2)  The heads of expenditure contained in the estimates (other than expenditure charged upon the Consolidated Revenue Fund of the Federation by this Constitution) shall be included in a bill to be known as the Appropriation Bill, providing for the issue from the Consolidated Revenue Fund of the sums necessary to meet that expenditure and the appropriation of those sums for the purposes specified therein.

    If the judicial funds are part of expenditure charged upon the Consolidated Revenue Fund, it goes without saying that the constitution excludes judicial funds from the annual budget estimates of the Executive which is the Appropriation Bill. In ordinary words, the President is not supposed to include funds meant for recurrent expenses, remuneration, salaries and allowances of Judicial Officers in the Appropriation Bill. Such funds should be drawn directly from the Consolidated Revenue Fund of the Federation outside appropriation practice. The only fund relating to Judiciary that is subject to appropriation is the capital expenditure because it is not provided

    It is clear that the framers of our Constitution wanted to make the Judiciary independent. Section 121 of the Constitution makes similar provisions which guarantee independent funding of the Judiciary at the state level.  Unfortunately, both the Federal and State Executives breach the clear constitutional provisions for the financial autonomy of the Judiciary.

    The breach prompted the learned Senior Advocate, Dr Olisa Agbakoba to institute an action against the Federal Executive, represented by the Attorney General of the Federation and the National Assembly in 2013. The writer of this article represented Dr Olisa Agbakoba in the action. Although the judgment was delivered against the Federal Executive and the National Assembly on 26th May 2014, the Federal Executive has persisted in the violation of the clear constitutional provisions relating to the financial autonomy of the judiciary at the federal level.

    It is amazing that the Federal Executive, whilst in disobedience to the Constitution makes the Presidential Executive Order No. 10 of 2020 purporting to provide for the Financial Autonomy of State Legislature and State Judiciary Order 2020, which has already been guaranteed by the Constitution. There is no gainsaying that loud noise about Executive Order No. 10 of 2020 is in the words of William Shakespeare, is much ado about nothing, because the Order does not provide for anything new.

    It is even hypocritic of the Federal Executive to seek enforcement of financial independence of Judiciary and Legislature at the State level while impinging on the independence of the Judiciary at the Federal level. The biblical admonition (Matthew 7:1-5; Luke 6: 41-42) is apposite here:

        “How can you say to your brother, “let me take the speck out of your eye”, where there is a log in your own eye? You hypocrite! First,  take the log out of your own eye, and then you will see clearly to remove the speck from your brother’s eye”.

    Now that the Federal Executive has apparently agreed on the financial autonomy of the other arms of Government (i.e. Judiciary and Legislature), the right thing is to immediately put in place adequate mechanisms to carry out the relevant provisions of the Constitution and not to sign an Executive Order purporting to donate what the Constitution has already provided. This is because, if the Judiciary is allowed to enjoy the financial autonomy at the Federal level, as provided by the Constitution, the Federal Executive would have laid a very good example for the States to follow.

    Written By: Chinedu Nneke (Senior Associate, Olisa Agbakoba Legal)

  • A Review of FIFA Guidelines on COVID-19

    A Review of FIFA Guidelines on COVID-19

    FIFA Guidelines on COVID-19  – A Review 

    It is no longer news that due to COVID-19, footballing events have been grounded for over a month with resulting legal issues cutting across various aspects of the game from employment to transfer of players within and across leagues. The Bureau of the FIFA Council has recognised COVID-19 as a force majeure event.

    In line with the powers conferred on the Council by Article 27 of the Regulations on the Status and Transfer of Players (RSTP) to recognise and decide on force majeure cases affecting the contracts for both players and clubs; player registration periods as well as the status of players in a football club, the Council established a working committee to proffer solutions to the difficulties arising from the COVID-19 pandemic.

    The members of the working committee, having deliberated on the above-mentioned matters unanimously adopted the solutions proffered in their deliberations to the issue at hand and came up with the Guidelines on COVID-19 Football Regulatory Issues.

    Subsequently, FIFA published the Guidelines on COVID-19 Regulatory Issues targeted at providing interpretative guidelines for certain salient provisions of the FIFA RSTP as well as the FIFA statutes. These Guidelines are geared towards achieving a harmonious resolution or mitigation of conflicts arising in the world of football due to the COVID-19 pandemic. To leave the provisions in the FIFA RSTP without such guiding principles would ensure that negotiating parties are advancing terms on a rather uncertain footing.

    Some of the guiding principles are discussed below:

    1. Expiring and New Contracts

    Article 18.2 of the RSTP provides that the minimum duration of a player’s contract shall be from its effective date until the end of the season while the maximum duration shall be 5 years or in practice, 5 seasons. It then follows that, for footballing contracts, the end of a season signals the end of a cycle of the contract.

    With the suspension of the current season as a result of the COVID-19 pandemic, it is clear that the current season will stretch beyond June 30, 2020, the registered date for the end of the league season, across Europe in particular. What this means is that at a certain point during the course of the protracted season, these four situations may arise:

    i) Players in the final year of their contract would be legally out of contract during the pendency of the current season and as such, not under employment with the teams they represent.

    ii) Players on season-long loan transfer would legally be required to go back to their parent clubs

    iii) Players with fairly longer years remaining in their contracts would have legally entered into a new year of contract whilst still playing in the current season. This could work hardship where contractual compensation and bonuses are triggered by the beginning of a new season.

    iv)  Also, players who were the subject of future transfer agreements would be legally required to report to their new club at the official start date of a new season.

    FIFA has given a robust interpretation to article 18.2 of the RSTP which would form guiding principles to aid the construction of affected contracts. According to the guiding principle, the following will now apply to International transfer agreements:

    i) Where an agreement expires on the original end date of a season, such expiration will be extended until the new end date of the season.

    (ii) Where an agreement is due to commence on the original start date of a new season, such commencement be delayed until the new start date of a new season.

    (iii) In case of overlapping seasons and/or registration periods, and unless all parties agree otherwise, priority be given to the former club to complete the season with its original squad, in order to safeguard the integrity of a domestic league and Member Associations (MAs) competition.

    If applied by MAs and stakeholders, these guiding principles will ensure that the season resumes and is completed almost seamlessly at least, the contractual businesses of MA’s and stakeholders.

    fifa guidelinesTo contextualise these principles bearing in mind the situations listed above, Arsenal F.C.’s Dani Ceballos may no longer be required to return to Real Madrid C.F. at the expiration of his loan deal on June 30, 2020 since the loan contract would now lapse at the end of the protracted English season.

    Also, Edison Cavani of Paris Saint-Germain F.C. (PSG) who is the subject of a future transfer to Atletico Madrid effective the 1st of July, 2020 would wait until the new commencement date of next season before he officially becomes an Atletico Madrid player. He would have to continue to represent PSG in competitions beyond the original commencement date of next season.

    Lastly, as a result of the overlapping season duration and difference in season duration between England and China, priority will be given to Manchester United F.C. to complete its season with Odion Ighalo; inspite of the fact that his loan deal expires on June 30, 2020, except Manchester United F.C. and Shanghai SIPG F.C. agree otherwise. This is in order to safeguard the integrity of the English Premier League.

    2. Registration Periods

    According to Article 6.1 of the FIFA RSTP, players who were the subjects of international transfers can only be registered for the new season during the registration period or ‘transfer window’. The definitions section of the RSTP defines a “season” as “the period starting with the first official match of the relevant national league championship and ending with the last official match of the relevant national league championship”.

    Article 6.2 of the RSTP further provides that a registration period is a period not exceeding 12 weeks before the start of the new season and another period in the middle of the season not exceeding 4 weeks.

    By virtue of Article 5.1 of Annexe 3 to the RSTP, such a registration period must be fixed and entered into the Transfer Matching System (TMS) by MAs, 12 months before commencement and such dates can only be amended or modified under exceptional circumstances by MAs up until the commencement of the Transfer window.

    Under the guidelines, FIFA deems COVID-19 an exceptional circumstance which will allow for the amendment or modification of transfer windows. This is important in order to cater for the impending extension of the current football season across the world. As a result, Transfer windows can now commence at the end of the protracted season. MAs can now amend their season commencement dates and Transfer windows on the TMS or otherwise, by notifying FIFA.

    3. Agreements that Cannot Be Performed As Parties Originally Anticipated

    The guidelines also seek to ensure that during this period, where employment obligations cannot be met, clubs, players, leagues and in fact, Trade Unions, where available, can come together to agree on possible solutions to the impasse. According to the guidelines, such agreements should address, without limitation: remuneration (where applicable, salary deferrals and/or limitation, protection mechanisms, etc.) and other benefits, government aid programs, conditions during contract extensions, etc.

    Reference should be made to national laws and collective bargaining agreements in the conclusion of such arrangements.

    Unilateral decisions to modify terms of contract can only be enforced by any party, where permissible under the relevant National Laws or Collective Bargaining Agreement. In the absence of such permission, the Dispute Resolution Committee of FIFA (DRC) and the Players’ Status Committee (PSC) may recognise such variations upon consideration of certain salient factors such as the economic situation of the club; the proportionality of any salary amendment; the net income of the employee after salary amendment; whether the decision applied to the entire squad or only specific employees; and; whether the club in good faith had attempted to reach a mutual agreement with its employee(s)

    In the alternative, agreements between Club and Employees may be suspended during periods when competitions are suspended, provided proper insurance coverage has been maintained for employees, and alternative income support arrangements have been made on behalf of employees.

    4. Other Provisions of the FIFA Guidelines on COVID-19 Regulatory Issues

    The guidelines also make provisions for other regulatory matters, such as:

    • The postponement of the commencement of the FIFA amendments to the RSTP, regarding restrictions on international loan agreements of players aged 22 years and above.
    • Clubs are not obliged to release their players to represent their countries in the March and April International football windows. It is also likely that this would affect the June and July International Football windows as it is expected that there will be a tight football schedule for clubs around that period, should the football season resume across countries around the world.

    In essence, these guidelines come as a timely intervention to the knotty situation created by the COVID-19 pandemic. While there are still other inevitable contractual and commercial disputes not under the purview of FIFA’s intervention, the Guidelines, if properly applied by MAs would ensure that sporting concerns are well addressed.

    With regard to transfer windows, it is necessary to adjust the normal regulatory position to the new factual circumstances surrounding the football community. Accordingly, FIFA will be flexible and will allow the relevant transfer windows to be moved so they fall between the end of the old season and the start of the new season.

    At the same time, FIFA will try to ensure, where possible, an overall level of coordination, bearing in mind the need to protect the regularity, integrity and proper functioning of competitions so that the sporting results of any competition are not unfairly disrupted.

    Indeed, one might say that on its part, FIFA has set the much-needed machinery in place for what might yet be a busy summer of quality footballing experience to help the world heal from the damning effect of the COVID-19 pandemic.

    Written By: Olayinka Suara (Associate) & Kayode Robert Ikumelo (Trainee Associate) – Sports, Entertainment and Technology Practice Group)

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