Konyinsola Ajayi: ‘There is need to harmonise business facilitation laws in Nigeria’
Prof. Konyinsola Ajayi obtained his first degree (with honours) from the University of Ife (now called Obafemi Awolowo University) and was called to the Nigerian Bar in 1980. He obtained an LL.M. from Harvard University in 1982 and a Ph.D. in International Markets from Cambridge University in 1991.
He was admitted to the Middle Temple of the English Bar in 1989 and was elevated to the rank of Senior Advocate of Nigeria (SAN) in 2000. He was once the Vice President of the Worldwide Alumni Association of the Harvard Law School.
An Associate fellow of the Institute of Advanced Legal Studies, England, Ajayi is also a Director of the Nigerian Economic Summit Group. He has authored and co-authored over 130 legal writings under the heads of Energy and Natural Resources Law, Banking Law, Corporate and Commercial Law, Project Finance and International Capital Markets.
An omnibus bill on business facilitation aimed at a single encompassing law that would involve over 30 existing legislations is before the National Assembly for consideration and possible passage. Prof. Konyinsola Ajayi (SAN), in this interview with Assistant Editor, Law and Foreign Affairs, JOSEPH ONYEKWERE, examines the import of such law. He also shared his views on other interesting legal issues.
Do you think omnibus law will be better for the country?
The first point to note here is that we have a body of laws that suffer from the vestiges of colonialism, and are laced with a good degree of unitarism or a command-controlled economy reminiscent of the military days – these are laws made by the military and the colonial government to serve their narrow interests and which do not work for a civilian democracy in a federal republic. It appears from what we know that in our last 20 odd years of democracy the waters of corruption have polluted our law making – such that all manner of ill-fitting, badly thought out or self-serving laws have made their way to our statute books. We now have too many agencies and departments that appear to be in a race to grab land and the patrimony of the people – our hard work and the result of our enterprise. It is against this background that I believe that there is a need to harmonise business facilitation laws in the country to enhance efficiency in government processes, remove administrative and regulatory bottlenecks and more importantly block any avenue for corruption. I reckon that these have formed part of the core mandate of PEBEC.
Furthermore, there are currently too many conflicting laws in Nigeria hence a compelling need to consolidate and check the excesses of government agencies to avoid duplicity of efforts and resources. I recognize that the bill, once it becomes law, will throw up several issues from an enforcement perspective given its cross-sectoral application. However, a well informed judiciary, which understands that the role of the courts in driving economic advancement should have no problem in construing the law in consonance with its underlying philosophy.
Again, can you foresee the possibility of the current National Assembly concluding on it before its tenure elapses in May?
In view of the recent waves of passing of legislations we have seen in the 8th Assembly, it is not impossible for the ominibus bill on business facilitation to be concluded before the inauguration of the new National Assembly. Indeed, we have seen emergency legislations passed to achieve a specific objective. If this Assembly is true to its oath and pledge they will work assiduously towards the passage of the Bill, as it can only make better an economy, otherwise in pain of an over bloated public service that not only represents a leech on the system but a means to corruption and illegal tapping of the wealth and time of the hard working people of this nation.
Apart from having an omnibus bill, how is PEBEC working to have a one-stop shop for the ease of doing business in the country?
As you are aware, PEBEC was set up in July 2016 to remove bureaucratic constraints to doing business in Nigeria and make the country a progressively easier place to start and grow a business. The council’s core mandates were to (x) move Nigeria upwards in the Doing Business 2018 Rankings; and (y) remove critical bottlenecks and constraints to doing business in the country and make Nigeria a progressively easier place to do business and thrive. In this regard, the council has done a lot of work particularly the implementation of Executive Order 01 with a view to enhancing doing business in Nigeria. However, no real progress will be made if the entire public service is not reformed lest the efforts of PEBEC be akin to preaching to a blind public service without sign language and singing to a deaf civil service without a script. Indeed, there is a palpable misalignment between policy objectives formulated and driven by PEBEC and ethos of the civil service infrastructure, which is to implement them in the real sense. We believe this structural misalignment must be remediated first for the good work of PEBEC to endure. PEBEC is trying. PEBEC has delivered. But someone is failing it. The one is almighty czar – the public service. Perhaps the offices of the President, the Secretary to the Government and the Head of Service themselves need to go through significant reform, in good public administration, so they can drive home what PEBEC has successfully built.
The Companies and Allied Matters amendment bill while seeking to reduce multiple directorships in public companies has no provision for corporate governance? Do you think corporate governance is not needed in the proposed law?
It should be noted that governance is generally about self-regulation and good conduct. There is a robust body of regulation for corporate governance in Nigeria, for public companies generally, and for regulated sectors. The Financial Reporting Council of Nigeria (FRCN) code of corporate governance, the CBN codes for Banks, the SEC code for public companies are cases in point. It follows therefore that the field is sufficiently covered and thus the new CAMA need not have provisions dealing with corporate governance. More importantly norms of corporate governance are ever evolving, which therefore means they should be delivered through a medium imbued with sufficient flexibility for ease of updates and amendments. You will agree that it is far easier to amend codes and guidelines compared to acts of the National Assembly. In sum I see no place for a code in the statute. We are already dying under the weight of just too many rules, regulations, codes and laws. We need self-discipline and personal esteem!
The IMF has just named Nigerians Sovereign Investment Agency, managers of the Sovereign Wealth funds as the worst transparently managed in the world after Qatar. Do you agree or disagree with that report and what are your reasons?
IMF has clarified that its report is essentially on funds managed by CBN – the Excess Crude Account funds and not the NSIA. This really puts paid to the issue, apart from the fact that the irony is that NSIA is one of the few success stories in our public service. They have operated thinly, efficiently, profitably, transparently, effectively and in accordance with its enabling statute. Speaking specifically to the point, it is thus important that issues are always put in the proper context before broad-brush judgments are passed. I have had a look at the report and it did not refer to the NSIA as non-transparent fund manager of the sovereign wealth of the federation. It is also important to note that the accounting metrics of local and foreign investment portfolios of sovereign wealth funds are somewhat different from what is typically applicable and we currently have no clarity on the basis for the figures provided by the IMF or the reasons for its assessment. However, the main issue seems to be the accounting for the excess crude account and indeed more needs to be done with respect to speed of accounts etc. Despite the enormous constraints under which its operates, the NSIA in my view has been run transparently and best on standard best practice and has attained several significant and lofty achievements.
AMCON has a 10-year lifespan that will terminate 2020. The body was established to revive the financial system by efficiently resolving the non-performing loan assets of the banks in the Nigerian economy. Does it mean there will be no more need for the body after next year?
It is not correct to assume that AMCON has a 10-year lifespan. I do not see that anywhere in its enabling statute. Though that may have been within the contemplation of the creators of AMCON, it is clear that that leg of the dream was indeed a fantasy. There is however a 10-year lifespan introduced in the third amendment of the AMCON Act with respect to a sinking fund that it codified. The point is that upon the commencement of business by AMCON it took the bold step of cleaning out the huge debris of non-performing loans in the banking sector in one full swoop. To do this it issued bonds backed by a FGN guarantee. In his wisdom the then Finance Minister, Segun Aganga, working through the DMO, insisted on the creation of a fund back stopping the FGN guarantee. This led to the creation of a sinking fund by all the banks, by way of a contract by them and AMCON, requiring them to pay a “percentaged” sum per annum into the fund.
The law codified this and gave it a 10-year life. I should perhaps step back and give a short narration of how we got here. Prior to the 2000s, there was no clear legal regime specifically tailored for the resolution of troubled bank assets, given that banks are special. Several measures were adopted; however, the inadequacy of these measures, and the regulatory framework in general, in ensuring financial system stability by prevention of contagion ultimately led to the passage of the amended CBN Act and the NDIC Act, 2006 which gave wider remedial powers (including, notably, the power to establish bridge banks) to the CBN and the NDIC. Notwithstanding, by the end of 2008, and heading into 2009, a good number of the Nigerian banks were teetering at the cliff edge, while some were already technically insolvent. In view of this worrisome trend, and the need to steady the ship in those rather turbulent times, the CBN moved decisively to strengthen the banking industry, protect depositors and creditors, restore public confidence and safeguard the integrity of the Nigerian Banking industry using crucially, the creation of AMCON to acquire the toxic assets of banks, among other reforms. Indeed, there is still the need for the acquisition of bad loans even after 2020 to ensure financial systems stability. Statistics show that the amount of Non Performing Loans (NPLs) in the banking sector increased by 21 per cent in Q2 2018. The idea of Private Asset Management Companies to complement AMCON has been floated by the CBN.
What do you think is the reason the Petroleum Industry Bill has lingered for so long at the parliament?
For there to be any significant legislative progress in getting the PIB over the line, there has to be a strong political will. What we see at play that has caused the embarrassing delay over the years is the politics of oil bolstered by the interests of the political elites, and the non-alignment of these with the interest of the Federal Government of Nigeria. Sight must not also be lost that given that oil revenue is the life blood of many of the FGN and to a greater extent most of our states, which are beggar economies that simply leech on these revenues, anything concerning the industry, draws significant attention. When there was a fight of revenue allocation from oil between the FGN and the states, a clear dividing line emerged between littoral oil producing states and the other non-oil producing states, apart from Lagos State which in its brief aligned with the resource control struggle of the Oil producing states. We know communities from where oil is produced feel they ought to be part of the sharing waterfall and many states oppose this. These are some of the factors that have in my view held us back.
Perhaps the cap to this is that the story of corruption in the oil and gas sector has not been pleasant because luddites who enjoy the path to unwarranted power and the opportunity to corruptly enrich themselves will continue to clog the legislative wheel that would have opened up the industry to greater transparency, better local participation and attract the much needed investment that is required to uplift an industry that is not free of the forces of disruption in the way we live, consume, and energize endeavors.
There has been a clamour for the review of the extant 1988 Arbitration and Conciliation Act in Nigeria. We understand that this bill when passed into law will repeal and replace the Arbitration and Conciliation Act of 1988 with a new Act that will be more in tune with the UNCITRAL Model Law of 2006. Is there enough push by practitioners (i.e. arbitrators) to ensure that this bill is passed into law as quickly as possible?
Yes, the Arbitration and Conciliation Act (Repeal and Re-enactment) Bill, which was passed by the Nigerian Senate on 1 February 2018, and awaiting concurrence of the House of Representatives, is a result of the push by arbitration practitioners to have a modern arbitration law. The bill addresses some of the flaws in the current Arbitration and Conciliation Act, beginning with adoption of the 2006 amendments to the UNCITRAL Model Law. It contains helpful new provisions on matters like immunity of arbitrator, appointing authorities; recognition and enforcement by courts of tribunal-issued interim measures; third-party funding and computation of time limits for commencing proceedings to enforce an award. These provisions update Nigerian law to bring it in line with current global standards and practitioners are keen on the new amendments. This said, in my view, there is a fundamental need to review the entire arbitration process as it has become rather too expensive, lengthy and adopting the very legal technicalities that served as a disincentive to litigants from the traditional courts. Where the characteristics of the traditional court system are found in arbitration, the very essence is defeated.
Frontline arbitrators are promoting Nigeria as an arbitration-friendly jurisdiction. Where is the country today with the advancement of commercial arbitration and how is this impacting on our economic growth?
There can be no doubt that for over a decade, arbitration has been selected as the preferred means of resolving commercial disputes, given the ills associated with the traditional litigation process, and the imperatives of an effective and expedient means to resolve commercial disputes. As we have seen in recent years, some arbitral institutions in Africa are already picking up much of the work on disputes between African parties and it appears that the arbitration centers in Africa are becoming mature and attracting disputes. Indeed, Nigeria and Nigerian arbitration practitioners are at the forefront of these efforts.
Statistics show that Nigeria has a sizable number of arbitrators in Africa and this has contributed to the revenue in the legal sector. Nigerians are often appointed to adhoc and institutional tribunals internationally, demonstrating our leading status in arbitration practice at least on the African continent. The Lagos Court of Arbitration (LCA) and the Lagos Chamber of Commerce International Arbitration Centre (LACIAC) are the main arbitration centres in Nigeria. The LCA’s use of internationally recognized neutrals, modern facilities and the adoption of innovative technology, make the LCA an efficient and best-in-class arbitration institution. LACIAC has shown a will to win a slice of the arbitration market in Africa by providing a user-friendly and offering a full service of ADR solutions including arbitration, mediation and conciliation. Following recent trends in international arbitration, the new LACIAC Rules of Arbitration 2016 are in line with international best practice. In Nigeria today, judges are becoming more knowledgeable in arbitration and sensitive to arbitration clauses in commercial contracts. In 2017, the former Chief Justice of Nigeria directed all heads of courts in Nigeria to issue practice direction for enforcing arbitration agreements and referring parties to arbitration where they have commenced court proceedings in breach of their arbitration agreements. Notably, Lagos State in its recent amendment to the High Court Civil Procedure rules have provided for a system where cases can be referred to the LCA. All these efforts by the judiciary and proposed amendments to the ACA, will greatly assist in attracting more cases to Nigeria and show the country as a preferred seat for arbitration in Africa. Pitifully we are not a data driven society – in spite of the fact that data is money! I doubt one can on an empirical basis say what the impact of arbitration is on business here. It appears however that it continues to gain currency, though my fear is that it is rapidly being stifled by its success in terms of ossifying its practices, becoming more litigious, getting too expensive and as far as I can see too much annoyingly being taken by putative international practitioners. This in part has been driven by increasing lack of confidence in both the Bar and Bench and thus a resort to choice of foreign law and foreign venues for arbitration. A change in this respect will no doubt add to the economy not just in terms of income for arbitration practitioners but for the nation in terms of being a dispute resolution centre, like England, but also in terms of being a good place to do business.
Some believe the cost of arbitration is discouraging, irrespective of its merits against traditional litigation. Do you share the view that it should be reviewed to accommodate low-income earners in business?
This is correct. The rising cost of arbitration has become one of its downsides and has to be reviewed as a matter of urgency to retain the value arbitration brings to dispute resolution. Where the process becomes financially burdensome, as it is today, small companies and indigent litigants will opt for the traditional public court system, which provides a cheaper alternative.
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