The Supreme Court has ruled that the Federal Government was right in voiding an allocation of Oil Prospecting Licences (OPLs) 321 and 323 to Korea National Oil Corporation (KNOC) and re-awarding the oil blocks to ONGC/Owel Petroleum Consortium.
In a four-to-one judgment, the apex court, in the suit numbered SC114/2013, between President of the Federal Republic of Nigeria & 3 others V. KNOC & 6 others, declared that the president’s action, which was taken in 2009, was within his executive powers.
The lead judgment was read by Hon. Justice Kudirat Motonmori Olatokunbo Kekere-Ekun. The Office of the Attorney General of the Federation, Abubakar Malami (SAN) represented the Federal Government while Dr Alex Iziyon (SAN) and Chief Robert Clarke (SAN) represented ONGC/Owel Petroleum Consortium and KNOC respectively.
In the judgment delivered last Friday, the court said the act, which arose from a contractual arrangement between the parties, not being a quasi-judicial act, was therefore not subject to judicial review in respect of which a writ of certiorari lies.
The Supreme Court noted that the dispute between the parties arose from a contractual relationship and held that, by the letter of award in respect of OPLs 321 and 323 respectively, “in my considered view, constitutes allegations of breach of contract.
“Where there is a contractual obligation between the parties, both parties are expected to comply with the terms and conditions of the contract. Where the contract contains terms for bringing the contract to award by either party and the terms are not complied with, the remedy of the affected party lies in action for breach of contract, damages, etc.”
Regarding the remedy available to the Koreans in respect of the termination of the award of OPLs 321 and 323, the Supreme Court held that the case of KNOC and its Consortium at the trial court was incompetent…
as the act complained of was an executive act in respect of which a writ of certiorari would not lie, having arisen from a purely contractual relationship.
The apex court consequently affirmed the decision of the Court of Appeal striking out the appellant’s suit at the trial court.
The grievance of the Koreans was the decision of the President of the Federal Republic of Nigeria conveyed in then Federal Ministry of Energy’s letter, dated 8th January, 2009, written by the Honourable Minister of State (Energy) and addressed to the Chairman, KNOC.
In the said letter, the Federal Government voided the allocation of OPLs 321 and 323 to KNOC on the basis that KNOC and its Consortiums failed to fulfill certain terms and conditions of the award and restored the rights of ONGC/Owel Petroleum Consortium as the original winners of the two blocks in the 2005 bid round.
ONGC/Owel Petroleum Consortium had taken steps to pay the signature bonus in full as stipulated by the letter until the consortium received information that the KNOC had approached the Federal High Court, Abuja sometime in March 2009, to seek redress and an injunction restraining the relevant Federal Government agencies from giving effect to the content of the January 8, 2009 letter.
The ONGC/Owel Petroleum Consortium had to hold back the payment of the signature bonus pending the outcome of the case in court.
The ONGC/Owel Petroleum Consortium had, as gathered, previously caused a bank guarantee for the full payment of the signature bonus to be issued by the State Bank of India in favour of the Federal Government of Nigeria.
The Consortium had to recall, at great cost, the bank guarantee when the blocks awarded were withdrawn and re-alloted to KNOC in 2005 on the basis of its prior right of first refusal, due to some non-bid related downstream obligations made by KNOC, which it failed to comply with, in addition to its failure to comply with the terms of the bid.
The Federal Government is reportedly excited about the judgment, which it believes would bolster the country’s readiness to observe international best practices in its bid to attract Direct Foreign Investments (DFI).
The judgment also accords with the theme of the discourse at the recently-held Oil and Gas Conference in Abuja where the issue of sanctity of contracts and agreements with government and government agencies was in focus with the major International Oil Companies (IOCs) in attendance.
Nigeria, industry watchers contend, would benefit from the development of the long dormant oil blocks following the Supreme Court judgment that has removed all encumbrances,.
This, as believed, would send a positive signal to the global oil industry at a time of increased levels of enforced nationalization of assets and uncertain statutory and judicial treatment in many markets.
Besides, it would raise Nigeria’s profile as an attractive investment destination, resulting in increased rates of oil exploration and production as well as greater competition from inbound capital to invest in Nigerian assets across all industries.
By facilitating the rapid development of the oil blocks to production, there would be inflow of taxable revenues for the nation, which currently do not exist.
There are expectations that steps would be taken to ensure strict and expeditious compliance with the Supreme Court judgment to enable ONGC/Owel Petroleum Consortium to start work on the blocks for the benefit of the country as well as to show the world that Nigeria is ready for business.