Beyond Compliance and Structuring in the Tech Industry: Focus on Values-Based Dispute Resolution Cover | Wole Aroge

Beyond Compliance and Structuring in the Tech Industry: Focus on Values-Based Dispute Resolution Cover | Wole Aroge

Introduction

Companies in the tech industry are often presented with mundane problems: that of what do we do with pending and imminent litigation? How to derive positive result from one? Whether protracted litigation or litigation generally may be prevented or preemptively resolved? How value assessment of concluded litigation may be used to identify potential areas of opportunity to mitigate risk?

This paper offers answers to these questions and attempts to raise the reader’s consciousness toward the importance of these issues.

Common Areas Where Disputes Arise

Labor and Employment: keeping valued employees and disengaging unsuitable employees usually cause as much difficulty as recruiting. Moreso all of these processes have avoidable landmines beginning as early as recruitment. Firstly, let’s bear in mind that although employment traditionally takes two forms, namely: contract of service[1] and contract for service[2], both having distinct legal and operational implications. For tech companies, in the spirit of innovation and corporate values-driven eye for efficiency at affordable cost, introductions like work-for-equity[3] employment arrangement are being adopted and there is no gainsaying that this helps micro startups through their early periods to fruition. However, this employment arrangement presents risks far above what traditional employments do.

Structuring and Investment: the tendencies for disputes can begin right from the incubation of and sharing an idea, through forming a company, creating a product and successfully attracting investment. Some of these disputes arise between founders; founders and prospective investors; founders and investors; founders and regulators. The subject of such disputes includes unauthorized disclosure or use of confidential information; shareholding and control; product; non-compliance with extant laws and relevant regulations.

Intellectual Property and Confidentiality: in an industry such as tech that uses peculiarly volatile but highly valuable and sensitive products, the risk of intellectual property breach is not only high but potentially more damaging. This poses one of the major threats to the industry and of course a major area where disputes often arise.

Contracts: contracts in tech, like other commercial contracts often require interpretation, and enforcement where there is breach of some or all obligations, it is therefore an area where concrete litigation preventive or remedial (against reactive) measures should be deployed timeously.

Payment Services, Loans and Recovery: from experience, this area of fintech seems to be the most volatile target for internet fraud or phishing which usually turns out to be untraceable and when traceable through onward transfer or payment destinations, the mechanisms required to secure recovery are too expensive or uneconomical. Equally, loan and debt recovery are other areas where dispute arises more often than it does in payment service.

Data: through regulatory compliance, management members in tech companies have become familiar with data protection laws, their obligations and the importance of adherence. Nevertheless, this area still remains a crucial area where disputes often arise between the company and customers or third parties and between the company and regulators.

Other areas include: actions of the board of directors and documentation; methods of marketing and distribution; real estate planning; insurance, health care and pension coverage; securities law compliance; product liability etc.

Preventive Measures

While there is precautionary cover by offered by lawyers during structuring, contracts stages as well as regulatory compliance, the cover usually falls short in forestalling all threats of litigation. In fact, I daresay that there are disputes that arise regardless of how perfectly a company is structured or its contracts negotiated, drafted and reviewed, some disputes also appear to be unforeseeable or inevitable.

While some of these problems or disputes may be prevented through what we have devised as dispute resolution risks-based legal audit, others require specialized remedial measures to achieve values-based results through effective dispute resolution mechanisms, many of which are already available but largely untapped.

What is legal audit? Generally, a legal audit focuses on a single aspect of a company’s business and analyzes the legal position. A legal audit ensures that no hidden risks exist within a company. The problems a legal audit identify are those that put the company at risk for penalties and litigation. While a legal audit performs an in-depth analysis of one area of a company, it is not so intrusive as to interfere with a company’s day-to-day operations.

In the form of legal audit that this paper proposes, instead of focusing on one specific area for a company’s operation, it will focus on all or high-risk aspects with the objectives of assessing impending litigation risk, the degree of possible exposure and outlining action steps to forestall litigation and/or claims.

To conclude, let’s consider an example in the area of labor, this legal audit will focus on the need to ensure cover for predictable areas of disputes from regularization of recruitment documentation; developing and adherence to company policies; developing and periodically updating disciplinary and termination policies in line with extant laws and contract; proactive action steps to settle with employees who may raise valid claims for unlawful termination, dismissal or other causes.

Remedial Measures

Here, this paper presents to the reader the idea of effectively reducing protraction in courtroom litigation through effective case-flow and case management, effective judgment enforcement and adoption of innovative trends.

With respect to debt and loan recovery, innovative trends like the establishment of the small claims court brought about by the Lagos State Judiciary which, now serves as model for other states provides a giant leap in our judicial process as well as viable mechanism through which fintech companies may recover loans and debt within the 60 days prescribed by the practice direction for small claims court. A small claims court is created with jurisdiction to entertain simple and liquidated debt recovery claims not exceeding N5, 000,000.00 and counter claim not exceeding N10, 000,000.00. It is time and cost saving because there is quick and efficient resolution of disputes within 60 days of filing. There is also limited adjournment which results in fast-track proceedings. In practice, courts have an average consolidated time to disposition of 66 days per case.

Upon completion of litigation, it is important to encourage and accept proposition from lawyers to carry out value assessment of concluded litigation which may be used to identify potential areas of opportunity to mitigate risk and set action steps that can provide cover for your company from exposure and depleting viability.

Suitable alternative dispute resolution (ADR) mechanisms: this is another viable solution to mitigating lengthy and protracted court procedures. The methods of ADR include Negotiation; Mediation; Conciliation; Arbitration.

Some courts have created ADR Centers to ease out of court settlements and promote the adoption of alternative judicial mechanisms. These courts include:  National Industrial Court–ADR Center; Lagos State High Court – Lagos Multi-Door Courthouse (LMDC) and The Federal High Court.

Finally, it is imperative and in line with the objectives of this paper to highlight the effects of ADR obligations created by contract, the extent of this obligation and the need to only insert ADR clauses that best suit the type of contracts because one size does not in fact fit all. From experience, parties to contracts have hit stumbling blocks as a result of the mandatory arbitration clause in their contract for example. This is because although Arbitration is highly effective in commercial disputes and in disputes generally, unlike other methods of ADR it is not cost-effective, therefore it is not suitable for contracts where for example, the parties are startup companies or founders, or contracts whose subject involve low monetary value.

What is the effect of an ADR clause in a contract?

When a contract has an ADR clause, generally, when a dispute arises it places an obligation on the parties to such contract to firstly explore the method of ADR specified in the contract in the order that the contract prescribes, before proceeding to court if a resolution is not reached.

What happens when one party decides not to participate in order to frustrate the other party?

The law provides that it is enough if the aggrieved party notifies the defaulting party of his intention to explore ADR, where the defaulting fails to take any step, the aggrieved party may proceed by submitting such dispute to the court without falling in breach of the ADR clause.

Conclusion

The questions examined in this paper which typify the challenges being faced by tech companies and the proposals offered underscore the importance of embracing a proactive approach to prevent avoidable litigation and adopt effective and values-based dispute resolution processes where litigation is unavoidable or beneficial.

 

[1] A Contract of Service is an agreement between an employer and an employee

[2] Contract For Service is a contract where instead of an employer-employee relationship, there is a client-contractor type of relationship

[3] Working for equity means a company compensates employees with shares in a company

Arbitration Practitioners Must Consider Alternatives To The Prohibitive Cost Of Arbitration- Tolu Aderemi

Arbitration Practitioners Must Consider Alternatives To The Prohibitive Cost Of Arbitration- Tolu Aderemi

 

The Chairman-Designate of the International Law Association (ILA) Arbitration Committee, Mr. Tolulope Aderemi, has decried the prohibitive cost of arbitration and urged his colleagues to ingeniously review the cost of accessing justice through alternative methods to litigation- arbitration, etc.

Aderemi aired these views during panel sessions at the International Chamber of Commerce (ICC) Commission on Arbitration and the just-concluded International Bar Association conferences, both held in the United States of America.

According to Aderemi, the pandemic’s consequences are such that parties in arbitration are increasingly concerned about the cost of prosecuting or defending their cases before arbitration tribunals. He stressed further that this is increasingly limiting access to justice and arbitration practitioners must now pay closer attention to this.

In his view, Nigeria must aggressively consider embracing 3rd party funding of parties and urged the President of the Federal Republic of Nigeria to give his assent to the amendment to the Nigerian Arbitration and Mediation Bill, a Bill which provides for third-party funding amongst other initiatives. Aderemi’s view is that in addition to embracing third-party financing as an alternative to funding arbitration, parties may also consider arbitration insurance as an alternative method of parties funding arbitration. This, according to Aderemi must be infused into the arbitration contract at the negotiation time. This will be a second-level improvement to dispute avoidance which companies must now embrace.Arbitration Practitioners must consider alternatives to the prohibitive cost of arbitration- Tolu Aderemi

The Chairman-Designate of the International Law Association (ILA) Arbitration Committee, Mr. Tolulope Aderemi, has decried the prohibitive cost of arbitration and urged his colleagues to ingeniously review the cost of accessing justice through alternative methods to litigation- arbitration, etc.

Aderemi aired these views during panel sessions at the International Chamber of Commerce (ICC) Commission on Arbitration and the just-concluded International Bar Association, both held in the United States of America.

According to Aderemi, the pandemic’s consequences are such that parties in arbitration are increasingly concerned about the cost of prosecuting or defending their cases before arbitration tribunals. He stressed further that this is increasingly limiting access to justice because of charge, and arbitration practitioners must now pay closer attention to this.

In his view, Nigeria must aggressively consider embracing 3rd party funding of parties and urged the President of the Federal Republic of Nigeria to give his assent to the amendment to the Nigerian Arbitration and Mediation Bill, a Bill which provides for third-party funding. Aderemi’s view is that in addition to embracing third-party financing as an alternative to finding arbitration, parties may also consider arbitration insurance. This, according to Aderemi must be infused into the arbitration contract at the negotiation time. This will be a second-level improvement to dispute avoidance which companies must now embrace.

The arbitration expert encouraged arbitrators to remain sensitive to current economic realities when discussing Arbitrator fees so that Users/Clients of the process will not view the mechanism. as a money-making venture, which it is not.

Arbitration is an alternative dispute resolution for commercial matters. It encourages party autonomy by allowing the parties to determine the resolution of their dispute, including the appointment of 3rd party neutrals, experts, duration of the hearing, seat and place of arbitration, etc. It is an alternative to traditional litigation, which sometimes outlive the parties in the Nigerian courts.

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Agreements: One Thing Every Business Should Get Right!

Agreements: One Thing Every Business Should Get Right!

By the nature of business, it is impossible for any business entity to operate like an island. Every business has customers, suppliers, thereby interacting with the larger society in different ways. One very essential part of this interaction are agreements. Agreements for supply, for sale, and for services for instance.

Agreements are terms of defined expectations or guidelines in place to guide the parties in a contract. A well and sound drafted agreement is integral for commercial sustainability and success. Businesses that payed less attention to their agreements have had bitter experiences and most times jeopardized their chances of getting legal redress at the end of the day.

A major feature of agreements is that they help outline the expectations and deliverables of both parties, thereby removing any ambiguity to the intention of the parties. In any business environment, it is critical to have legal documentation in place to establish a system of rules and policies governing the legal enforcement of promises. Whether it be to simply memorialize a common understanding of an organizational relationship or govern future venture needs, the protections afforded by strong contracts are invaluable to operating a successful business.

Protecting your business in the event of a breach of contract is also a major advantage of having an Agreement. A breach of contract means that the party in breach has acted contrary to the terms of the contract by performing a contract negligently and not in accordance with its terms. When there is a breach of contract, the aggrieved party can be awarded damages. Damages are awarded to restore the plaintiff as far as money can to the position he would have been if there had been no breach.

There are other advantages of having an agreement but businesses can only benefit from them, when there is an Agreement. Such Agreement could be written or verbal, however, written agreements are better as they are easier to prove.
If you have any comments, questions or remarks about Agreements, you can simply drop a comment or send us an email.

AOC Solicitors
www.aocsolicitors.com.ng
info@www.aocsolicitors.com.ng
09029755663.

Originally published by AOC Solicitors 

An Overview of the Nigerian Startup Act 2022 | AOC Solicitors

An Overview of the Nigerian Startup Act 2022 | AOC Solicitors

 

Introduction

Nigerian entrepreneurs have long been harmed by adverse regulatory conditions that make it more difficult to launch, build, and scale an innovative enterprise. According to a 2020 report from World Bank[1] on doing business, Nigeria was ranked low in the ease of doing business ranking as it was ranked 131 out of 190 countries that made the list. Nigeria’s low ranking in this report did not come as a surprise because the nation’s business ecosystem with specific emphasis on the tech space contends with frustrating and stifling policies from the government and a number of other challenges. A number of promising tech startups in Nigeria with the potential to immensely drive profit of the Nation’s economy stopped operation because of the government’s approach to policies that relate to tech support. To remedy this situation plaguing the Nation’s business environment, the Nigerian Startup Bill was forwarded to the senate on March 1, 2021. On October 19, 2022, President Muhammadu Buhari signed the Nigerian Startup Bill into law. As such, the nation for the first time has a unifying law to regulate its startup ecosystem; The Nigerian Startup Act (“the Act”).

Prior to the Nigerian Startup Act, the laws that govern Startups and SMEs were found in different legislations, which made for proliferation of taxes to be paid to numerous agencies. These legislations also provide for the payment of tax to different regulatory agencies. Some of these legislations includes The Companies and Allied Matters Act, 2020, The Investment and Securities Act, The Companies Income Tax Act and The Personal Income Tax Act.

The introduction of the Nigerian Startup Act (the “Act”) is an innovative development that aims to improve the business environment for startups in Nigeria. The major objective of the Act is to create an enabling environment for startups by providing a legal and institutional framework for the development of startups, creating incentives for the development and growth of technology related talents, removing regulatory constraints, and positioning Nigeria’s startup ecosystem as the leading digital technology centre in Africa. The bill eradicates the legal uncertainties that have trailed the startup industry in the past. It provides for what qualifies a company to register and obtain startup status. This article aims at giving a brief overview of the salient provisions of the Act which embodies 51 Sections, and one Schedule.

 

Salient Provisions of the Nigerian Startup Act 2022

Definition of Startups under the Act

Startups are defined under the Act as a company in existence for not more than 10 years, with its objectives being the creation, innovation, production, development, or adoption of a unique digital technology innovative product, service, or process.[2]

According to this definition, the Act will be applicable to tech-enabled startups, which are businesses that use current, cutting-edge technical advancements to address operational problems or enhance consumer experience. Small and medium enterprises (SMEs) that are not tech related would consequently not be covered by it.

Startup Labelling

The Act provides that before a company can be labelled a startup, it must obtain a certificate known as the startup label. This means that only companies with the startup label will be recognized as startups. By virtue of section 13(2) ; a startup will be granted a startup label where it is registered as a limited liability company under the Companies and Allied Matters Act for a period not more than ten years, with its objects being innovation, development, production, improvement  and commercialization of a digital technology innovative product or process; to be regarded as a startup by virtue of section 13(2), such company must have at least one Nigerian as a founder or Co-founder of the startup, provided that the Nigerian founder or co-founder will share from profit or revenue from the sale of shares and at least 51% of its shares should be held by Nigerians. Companies whose foreign participation exceeds 49% will still qualify where the ultimate beneficial owners of its foreign corporate shareholders are Nigerian citizens. Companies issued with a startup label are required by the Act to adhere to the requirements stated above and failure to comply with these obligations can revoke their startup label.[3]

The Act mandates that a Startup Support and Engagement Portal should be established to facilitate the issuance of the startup label and also bridge the gap between regulators and startups. The Startup portal shall also be responsible for creating opportunities for startups to participate in challenges and programs that would enhance financing, innovation and provision of incentives among others.[4]

 

The Startup Consultative Forum

The Act established a Startup Consultative Forum (the “Forum”)[5], which will be made up of industry stakeholders and representatives, to prevent onerous regulatory policies. The Forum provides stakeholders with a constant channel of communication with the Nigerian government for the advancement of the startup ecosystem. The Act also mandates the National Digital Innovation, Entrepreneurship, and Startup Policy’s implementation in order to foster the growth of the startup ecosystem. The introduction of aggressive government measures that impede the ecosystem’s growth is expected to be reduced to a minimum by the execution of the Policy and ongoing engagement with stakeholders.

Establishment of the Council for Digital Innovation and Entrepreneurship

The Act establishes a council known as the national council for digital innovation and entrepreneurship.[6] The council has the duty to ensure the realisation of the objectives of the Bill, harmonise laws that regulate startups and ensure the development of digital technology through grants to persons and institutions involved in research and technology.[7] The council shall also have the power to examine the regulations and directives of Ministries, Departments and Agencies that directly affect the functioning, funding and operations of startups in Nigeria.[8]  The National Information Technology Development Agency shall serve as the Secretariat of the Council (“the Secretariat”)[9], and shall be in charge of managing the labelling process of a startup, providing access to information and performing such other duties as required by the bill.

 

Establishment of Startup Investment Seed Fund

The Act establishes a fund known as Startup Investment Seed Fund to be managed by the Nigeria Sovereign Investment Authority otherwise known as the fund manager.[10] The startup investment seed fund by virtue of section 19 aims to provide special seed funds to startups. The fund will provide finance and tech reliefs to startups. This will undoubtedly increase access to funding for startups and improve the startup ecosystem in Nigeria.

Training, Capacity Building, and Talent Development

The Act introduces a program that will enhance the training[11] and development of talents[12] in the Nigerian startup ecosystem. It provides support for academic research institutions geared towards startup development[13]. The implication of this is that startups and their employees will have access to educational programs that will empower them with the right skills and enhance their competitiveness in the industry.

The Act empowers the secretariat to collaborate with the National Universities Commission, universities, and polytechnics within Nigeria to develop modules, programs and hold workshops aimed at impacting knowledge necessary for the establishment and running of a startup in Nigeria. The Secretariat shall establish centres for the acquisition of digital technology in the six geopolitical zones of Nigeria for the promotion of digital technology utilisation, strengthening of digital technology management capability, and information systems. The Secretariat shall also support the activities of an academic research institution to the development of a startup.

Introduction of Tax and Fiscal Incentives

Companies labelled as startups will benefit from some tax reliefs and incentives under the Act. These labelled startups are eligible for pioneer status incentives and other tax reliefs[14]. Labelled startups with at least ten employees where 60% of the employees have no prior work experience within three years of graduation or any vocational program have access to percentage-based tax relief of 5% on income tax[15]. Labelled Startups under the Act will also be eligible for export incentives and financial assistance from the Export Development Fund, Export Expansion grant and the Export Adjustment Scheme Fund.[16]

The Act further provides for access to government grants, loans and financial support through a credit guarantee scheme.[17]

The Act encourages investment in startups by providing tax incentives and reliefs for investors investing in a labelled startup.[18] Tax incentives are also provided to employees and external service provides for labelled startups.[19] By virtue of section 31, an eligible employee of a labelled Startup shall be entitled to personal income tax exemption of 35% on the income of the employee for a period of two years from the date of engagement by the labelled Startup. The criteria for eligibility of an employee will be determined by the Secretariat and the Joint Tax Board.

Provision of Regulatory Support

The Act enhances regulatory support for startups. It provides for collaboration with regulatory bodies to facilitate seamless processes for labelled startups. The provision for regulatory support applies to bodies like the Corporate Affairs Commission[20], Nigerian Copyright Commission, and Trademarks, Patent and Design Registries,[21] Securities and Exchange Commission,[22] National Office for Technology Acquisition and Promotion,[23] Central Bank of Nigeria,[24] and Nigerian Exchange Limited.[25]

 

Introduction of Incubation and Accelerator Programs

The Act also provides for the establishment of accelerator and incubator programs that will grow the startup ecosystem. The Act seeks to create a policy that will aid the establishment and development of accelerators and incubators, it also aims to regulate the relationship and promote collaboration between accelerators, incubators and startups.[26]

These incubators will help startups solve operational issues they are bound to encounter in running their business.

Shortcomings of the Act.

Despite the several innovations introduced by the startup act, it is not devoid of certain shortcomings.

One major shortcoming of the Act is the proliferation of laws and regulators, although the act is in line with international standards, it introduces additional bodies and regulations to enterprises that will typically fall within the ambit of CAMA, thus resulting in the proliferation of laws. Similarly the introduction of more administrative bodies would add an extra hurdle in the operation of startup companies.

Conclusion

The introduction of the Act is truly a step in the right direction in creating an enabling environment for Startups to thrive in Nigeria. It seeks to reduce regulatory hurdles currently faced by Startups and relevant regulators including the Corporate Affair Commission and the Securities and Exchange Commission in controlling the startup ecosystem in Nigeria. However, like with previous laws, there is no certainty that the Nigerian government will put the provisions of the Act into practice, but the new law, in the opinion of Oswald Osaretin Guobadia, Senior Special Assistant to the President on Innovation, leaves room for business owners to take the initiative.

The Act seeks to leverage the growing digital economy in the country. A regulatory framework like this will improve the ecosystem for startups as well as encourage investors to invest in startups which will in effect create more employment and improve the economy of the nation.

AOC Solicitors

Adedunmade Onibokun & Co.

info@aocsolicitors.com.ng

www.aocsolicitors.com.ng

[1]  World Bank  “Doing Business 2020” available at https://openknowledge.worldbank.org/bitstream/handle/10986/32436/9781464814402.pdf?sequence=24&isAllowed=y (Accessed 20 October 2022)

[2] Section 13(2) of the Nigerian Startup Act 2022

[3] Section 17 of the Act, withdrawal of a Startup Label

[4] Section 10(1) and (2) of the Act.

[5] Section 12 0f the Act

[6] Section 3(1) of the Act

[7] Section 7(1) of the Act

[8] Section 7(2) of the Act

[9] Section 9 of the Act

[10] Section 19 of the Act

[11] Section 21 of the Act

[12] Section 22 of the Act

[13] Section 23 of the Act

[14] Section 24 of the Act

[15] Section 26 of the Act

[16] Secton 27 of the Act

[17] Section 29 of the Act

[18] Section 30 of the Act

[19] Section 31 of the Act

[20] Section 33 of the Act

[21] Section 34 of the Act

[22] Section 35 of the Act

[23] Section 36 of the Act

[24] Section 37 of the Act

[25] Section 39 of the Act

[26] Section 41 of the Act

Originally published by AOC.

The Absence Of An Oath Clause In A Sworn Declaration: How Fatal? | Abdulkabir Badmos

The Absence Of An Oath Clause In A Sworn Declaration: How Fatal? | Abdulkabir Badmos

The Absence Of An Oath Clause In A Sworn Declaration: How Fatal?[1]

INTRODUCTION

At one point or the other in one’s legal practice in Nigeria, there is the likelihood of haven been faced with the challenge of wriggling out of a situation where due to inadvertence of counsel, the oath clause is omitted in an affidavit or a witness statement on oath to be used in court. This error is sometimes discovered only after the affidavit has been filed and the case is to come up for hearing. While many litigators who find themselves in these unpleasant situations simply blame the omission on their secretaries, the junior lawyers in the firm bear the brunt in others. This article therefore interrogates the absence of an oath clause in a sworn declaration vis-à-vis the provisions of Oaths Act, LFN 2004, conflicting judicial interpretations of the Court of Appeal and until the recent intervention by the Supreme Court of Nigeria.

SWORN DECLARATIONS AND THE REQUIREMENT OF AN OATH CLAUSE.

In the trial of cases in Nigeria, the Rules of the various courts provide that evidence may be adduced either by filing an affidavit, as in suits commenced by originating summons/motions procedure or witness statements on oath where the suit is commenced by a writ of summons. Whichever of these procedures is adopted, a written declaration on oath is required as an integral part of the frontloaded processes (or interlocutory applications) before the Court, prior to the date set down for hearing. In defining an affidavit, the court held in the case of Onujabe v. Idris[2] as follows:

“An affidavit is a statement of facts or declaration made either on oath or affirmation before an authorized person. The averments in an affidavit are admissible as a fact until disproved because the averments are sworn before a commissioner for oaths. The life of an affidavit is the declaration on oath. What makes that piece of paper an affidavit competent to support the motion on notice is the attestation or swearing before the Commissioner for oaths. Once the document is not sworn to, it is a mere piece of paper not an affidavit. Therefore without oath there is no affidavit.”

A distinguishing feature of an affidavit therefore, that sets it apart from every other declaration is that it is made on oath before a person authorized to administer oaths. Persons authorized to administer oaths include the Chief Justice of Nigeria, Presidents and Justices of the Supreme Court and Court of Appeal, Judges of the Federal High Court, Notaries Public and Commissioners for oaths.[3]

Essentially, affidavits used in judicial proceedings constitute and forms part of the body of evidence led in a case.[4] An affidavit therefore, by the provision of the First Schedule to the Oaths Act, and usual practice, concludes with a paragraph that reads:

“I do solemnly and sincerely declare that I make the solemn declaration conscientiously, believing same to be true and by virtue of the provisions of the Oaths Act.”

It is therefore considered a settled position of the law that a sworn declaration must contain the above words for it to be valid and admissible in evidence. The absence of the words, before now, is seen as a fundamental defect as to the substance and not form, curable under Section 4 (2) (b) and (c) of the Oaths Act or Section 113 of the Evidence Act, 2011. In the case of GTB v. ABIODUN[5], the Court of Appeal per PAUL OBI ELECHI, JCA held:

 

“As stated earlier in the course of this judgment, any written statement which does not bear the 1st schedule to Section 13 of the Oath Act, can not be said to be a written statement on oath. It is this vital aspect of the oath that is missing in the written statement of the Respondent’s sole witness in the present appeal. Non compliance with the provisions of the Oaths Act is a breach of the Oath Act. The consequence is that the entire statement of the Respondent sole witness is left bare. The Rules of Court are not made for fun, they are made to be obeyed. See: Hard v. Hact (1990) 1 NWLR (pt 126) 276, Tom Ikimi v. Godwin Omamnli (1995) 3 NWLR (pt 383), Ibrahim v. Col Cletus Emein & Ors (1996) 2 NWLR (pt 430) 322, Tehat A.O. Sule v. Nigeria Cocoa Board (1985) All NLR 257, Odu v. Jolaoso (2002) 37 WRN 115.” 

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Similarly, in the latter case of ANENE v. ALABI & ANOR,[6] it was held Per JOSEPH EYO EKANEM, JCA as follows:

“…What is the effect of the absence of the oath? Section13 of the Oaths Act is worded in mandatory terms as it uses the word “shall” which generally speaking is a term of command that implies a mandate. The implication is that an oath is lawful if it is taken before the person set out therein and is in the form set out in the First Schedule to the Act. The converse is that an oath is not lawful if it is not taken before the specified person and in the form set out in the said Schedule. Where the form of the oath set out in the said Schedule is completely absent, there is no affidavit… At page 526, Bage, JCA, as he then was, opined that: “Any written statement which does not bear the First Schedule to Section 13 of the Act, cannot be said to be a written statement on oath. It is only when the declaration of the oath is made that the identity of the maker of the statement can be ascertained. It also serves as to the verification as truth of the statement made therein.” See also GE INTERNATIONAL OPERATION LTD v. Q-OIL AND GAS SERVICES (2015) 1 NWLR (PT. 1440) 244, 270 where Eko, JCA, as he then was, opined that: “In law and common parlance, a written statement that its maker swears to the truth thereof is an affidavit: see Oxford Advanced Learner’s Dictionary. According to Black’s Law Dictionary, 7th Edition a deposition is a witness’s out-of-Court testimony that is reduced into writing for use in Court. It becomes an affidavit if the deponent swears to an oath the declarations made therein are the truth of the matter. By the oath the out-of-Court statement in writing becomes a testimony. It is the oath that gives validity to deposition as a testimony… without the oath, the deposition or written declarations on a piece of paper is a mere piece of paper. The oath makes written declarations or depositions on a piece of paper an affidavit.” Counsel for the 1st respondent argued that the defect in the affidavit was cured by Section 113 of the Evidence Act which provides that: “The Court may permit an affidavit to be used, notwithstanding that it is defective in form according to this Act, if the Court is satisfied that it has been sworn before a person duly authorized.” ?The trial Court held that the affidavit was worthy of being used as the defect therein was cured by Section 113 of the Evidence Act especially as it was sworn before an authorized person. With all due respect, I do not agree with the trial Court. This is because the defect in the affidavit is not a defect in form; rather, it is a total absence of substance and form in that the statement in the First Schedule is completely absent, thus leaving the affidavit with nothing to be cured. The provision of Section 113 of the Evidence Act is intended to cure formal defects and not substantial defects as in this instance. In OBUMNEKE v. SYLVESTER (2010) ALL FWLR (PT. 506) 1945,1959-1960, Alagoa, JCA, as he then was, opined as follows: “Thus, every oath to be legitimate must comply with the provisions of the Oath Act, Cap. 333, Laws of the Federation and the First Schedule thereto. Where there is no statement in an oath stating that it is made solemnly, conscientiously believing the contents to be true and correct by virtue of the Oaths Act, it is not an oath or affidavit properly so called and the signature of the Commissioner for Oaths cannot remedy the defect… Failure to comply does not render the document defective in form but in substance and liable to be struck out.” Order 5 Rules 1, 2 and 3 of the Edo State High Court (Civil Procedure) Rules, 2012, cannot serve as a cure for the fatal defect. The provisions make non-compliance with the Rules an irregularity which does not nullify proceedings. Being rules of Court, it cannot be used to cure a breach of an Act of the National Assembly which ranks much higher than it in the hierarchy of legislation. The affidavit in this matter ought to have been struck out by the trial Court for being incompetent.”

By the pronouncements of the various divisions of the Court of Appeal in the above decisions, it is apparent that the Court refused the use of an affidavit and witness statement on oath because they did not contain the oaths clause as prescribed by Section 13 of the Oaths Act.

However, the same Court of Appeal sought to make a distinction in the case of UDUMA v. ARUNSI[7], where it held as follows:

“There is a distinction between affidavit evidence in procedure begun by originating summons as against statement of witnesses on oath in an election proceeding or proceedings begun by writ. In respect of the latter scenario, where the written statement is to be adopted again on oath by the maker before his cross-examination on it, whatever defect in the original oath in respect of the witness statement has been cured by the second oath made in court before the judex prior to the adoption of the witness statement by the maker and his subsequent cross-examination. [Udeagha v. Omegara (2010) 11 NWLR(Pt. 1204) 168 referred to; Onyejiocha v. Maduako (unreported) Appeals Nos. CA/EPT/54/2008 and CA/EPT/54A/2008 of 14/7/2007 departed from.]”

Similarly, in the case of STANBIC IBTC BANK v. LONGTERM GLOBAL CAPITAL LTD & ORS[8], the Court of Appeal per OBANDE FESTUS OGBUINYA, JCA held as follows:

“The focus of the appellant’s complaint is that the oath does not contain the statutory declaration/conclusion statement: “I do solemnly and sincerely declare that I make this solemn declaration conscientiously believing same to be true in accordance with the Oaths Law”. The appellant persisted that the statutory declaration, as enjoined by Section 11 of the Oaths Law, is mandatory and its absence rendered the oath incompetent. I have, in a bid to pacify the law, visited the record at the abode of the CW1’s Oath which occupies pages 21 – 33, volume 1, of the record, I have subjected the 40-paragraph oath to a merciless scrutiny. Unarguably, the oath, at its twilight, is void of the conclusion statement outlined above. The idea of offering evidence by dint of written statement on oath is a budding/green regime in adjudication. It is a method which grants witnesses the liberty to testify by deposition. Deposition signifies “a statement of a witness made under oath out of Court… Depositions are all matters of procedure as they are adjectival in nature and content”, see Buhari v. INEC (2008) 19 NWLR (Pt. 1120) 246 at 377 and 378, per Tobi, JSC. Indubitably, the admissibility of evidence, of all species, is regulated by the Evidence Act. In Buhari v. INEC (supra), the contest circled around the validity and admissibility of oaths/depositions of witnesses. Tobi, JSC, incisively, outlined four instances that will make an oath inadmissible, namely: if it is sworn before (a) a person on whose behalf the same is offered, (b) his legal practitioner, (c) a partner, (d) a clerk of his legal practitioner. It flows from this ex cathedra authority, a written statement on oath will be inadmissible if it is afflicted with any of the four negative elements adumbrated above. It is not in doubt that the oath of the CW1, which is sought to be expelled, is not plagued by any of these negative elements as to drain it of its validity and admissibility. That is not all. The selfsame Oaths Law makes allowance for omission or irregularity as to oath under Section 4 thereof. In Section 4(2) (b) and (c), it provides: (2) No irregularity in the form in which an oath is administered or taken shall – (b) invalidate proceedings in any Court; or (c) render inadmissible evidence in or in respect of which an irregularity took place in any proceedings. ?It is a recognized canon of interpretation of statutes that provisions of any legislation are not to be subjected to fragmentary interpretation. Put simply, mutually-related provisions of any statute should be married together and given holistic construction in order to garner the intention of the law maker, …. In due allegiance to the injunction of the law, I have given a communal/conjunctive reading to the mutually-related provisions of Sections 4 (2) (c) and 11 of the Oaths Law. It is my humble view that the provision of Section 4(2) (c) neutralizes the mandatoriness of the provision of Section 11 of the Oaths Law. Put bluntly, Section 4 (2) (c) douses the effervescent operation of Section 11 of the Oaths Law. That is to say, any irregularity in the form of an oath will not be fatal to the administration of oath under Section 11 of the Oaths Law. It follows that the CW1’s oath will be salvaged under the saving shelter of Section 4(2) (c) of the Oaths Law. The absence of conclusion statement is drained of the potential to ruin the CW1’s oath or smear it with an indelible incompetence which will snowball into its inadmissibility. The oath of CW1 is not marooned in the murky ocean of inadmissibility on the footing of the lack of the conclusion statemsent/declaration thereon. On the contrary, I am compelled by the salvaging provision of Section 4(2) (c) of the Oaths Law, to crown the CW1’s oath with the deserved toga of competence and validity. I am dispossessed of any justification, in law, to ostracize the CW1’s written statement on oath of 16th May, 2013. I welcome it to this appeal. I accord a wholesale affirmation to the lower Court’s impeccable finding on its competence.”

See also the case of CRC CREDIT BUREAU LTD v. LONGTERM GLOBAL CAPITAL LTD & ANOR (2021) LPELR-55674(CA) Per OBANDE FESTUS OGBUINYA, JCA (Pp 55 – 59 Paras C – C).

Whilst the Court took the rigid stance in the GTB and ANENE’s cases (supra), to the effect that a witness statement on oath without an oath clause is incompetent and ought to be struck out, the same court, differently constituted, took a more liberal approach in the cases of Stanbic IBTC and Uduma cases (supra) to hold that once a person adopts his witness statement on oath in the open court, any defect as to form is cured by the latter oath taken upon adoption.

It is important to note that all the above decisions, and others like them delivered prior to 2022 were all Court of Appeal decisions, which by our hierarchy of Courts do not sound a note of finality on the point. These conflicting decisions had further confused the issues leaving practitioners to pick the authority that suits the position they are canvassing in court.

As for the trial courts, the position to take remained unsettled since it is trite that where a lower court is faced with two conflicting decisions of a higher Court, particularly the Supreme Court, the court is bound to follow the decision that is latter in time. See Osakue v. FCE (Technical) Asaba.[9]

Where however a trial court is faced with two conflicting decisions of the Court of Appeal, a trial High Court may pick and choose which of the decisions is closest to the peculiar facts of the case before it and apply same.[10] In the case of ONWUMELU v. DIRI,[11] the Court of Appeal held thus:

“Where a lower Court is confronted with conflicting decisions of a superior court, while the inferior court cannot sit on appeal over decisions of a superior court, the inferior court is nevertheless accorded a right to make a choice between the conflicting decisions.”

Interestingly, the same Court has equally held that where the Court of Appeal is faced with two conflicting decisions of the Supreme Court, the Court can pick and choose which of the two decisions to follow.[12] In the case of G.T.B. PLC v. FADCO IND. LTD,[13]  it was held that:

“The Court of Appeal is bound by the decision of the Supreme Court but where the Court of Appeal is faced with two conflicting decisions of the Supreme Court, the Court of Appeal is allowed to choose which to follow between the two decisions.”

In the writer’s humble view and considering the above judicial authorities therefore, it would seem that the validity of an affidavit and a witness statement alike, without an oath clause has remained unsettled for a long time. These uncertainties may, according to Sidi Bage, JCA (as he then was), mean that the absence of the oath clause is a fundamental defect that goes to the root of the deposition and cannot be treated as a mere irregularity.

 

DISTINCTION BETWEEN AN AFFIDAVIT AND A WITNESS STATEMENT ON OATH

It is not strange to find practitioners take the rules applicable to affidavit and witness statements on oaths as one and the same. Whilst it is conceded that they share many things in common, they however have some latent differences which make drawing a distinction between them, inevitable.

First, by virtue of Item 23 in the Exclusive Legislative List in Part 1 of the Second Schedule to the Constitution[14], “evidence” is under the Exclusive List in the Nigerian Constitution. As such, only the National Assembly has the legislative competence to make laws regarding it.[15] Thus, the Evidence Act, 2011[16], an Act of the National Assembly regulates affidavit evidence.

Witness statements on oath on the other hand are a creation of/regulated by rules of the various courts.[17] They evolved upon the departure from the era when witnesses give their entire testimonies orally while the Judges take them down in long hand. The frontloading system, in sum, brought about witness statements on oath.

Second, as a general rule, an affidavit constitutes evidence on its own without the necessity of calling the maker to give evidence. This is however not the case with witness statements on oath, whose evidential value is only activated when the deponent, on oath, adopts it in the open court.[18] In the case of Hon. Fabian Okpa v. Chief Alex Irek & Anor, Ndukwe – Anyanwu, JCA, the Court relying on the case of Akpokemovo v. Aga[19] held as follows:

“This Court has consistently held that a witness Statement on Oath is different from an Affidavit evidence. An affidavit is a statement of fact which the maker or deponent swears to be true to the best of his knowledge. It is a Court process in writing deposing to facts within the knowledge of the deponent. It is documentary evidence which the Court can admit in the absence of any unchallenged evidence…. On the contrary, a witness statement is not evidence. It only becomes evidence after the witness is sworn in Court and adopts his statement. At this stage at best it becomes evidence in Chief. It is therefore subjected to Cross-Examination after which it becomes evidence to be used by the Court. If the opponent fails to Cross-Examine the witness, it is taken as the true situation of facts contained therein.”[20]

Similarly, in the case of MEGAMOUND INVESTMENT LTD & ANOR v. OMOTOSHO & ANOR,[21] it was held thus:

“Section 80 and 90 do not cover witness statement on Oath but Affidavit evidence. The most glaring similarity between affidavits (which are regulated by the Evidence Act) and Witness statement on Oath regulated by Rules of Court is only the Oath to be sworn before a commissioner for oaths. They are however two different processes. The statement becomes evidence only upon adoption during examination in chief and not before that. An affidavit does not have to be adopted in examination in chief before it can be relied upon as evidence. It is evidence on filing. See HON. FABIAN OKPA V. CHIEF ALEX IREK (2012) LPELR- 8033 (CA) where the Court distinguished between a statement on oath and an affidavit in the following words: “This Court has consistently held that a witness statement on oath is different from an affidavit evidence. An affidavit is a statement of fact which the maker or deponent swears to be true to the best of his knowledge. It is a Court Process in writing deposing to facts within the knowledge of the deponent. It is documentary evidence which the Court can admit in the absence of any unchallenged evidence. Akpokeniovo vs. Agas (2004) 10 NWLR pt 881 page 394. On the contrary, a witness statement is not evidence. It only becomes evidence, after the witness is sworn in Court and adopts, his witness statement. At this stage at best it becomes evidence in chief. It is thereafter subjected to cross examination after which it becomes evidence to be used by the Court. If the opponent fails to cross examine, the witness, it is taken as the true situation of facts contained there in.” See also BARR. IHUOMA E. UDEAGHA & ANOR V. MATTHEW OMEGARA & ORS. (2010) LPELR-3856(CA), UDUMA V. ARUNSI (2010) LPELR – 9133 (CA).”

 

Thus, it is therefore settled law that although an affidavit and a witness statement on oath are both sworn declarations before a person commissioned to give oaths in Nigeria, the rules applicable to them are different.

THE RECENT SUPREME COURT INTERVENTION

The Supreme Court of Nigeria recently stepped into resolving this age long controversy to determine the validity or otherwise of a witness statement on oath which was argued to be incompetent for failure to have the oaths clause. This was in the case of ADEJUGBE v. ADULOJU.[22] The facts of the case were that the Plaintiff at the trial court commenced an action against the defendants before the High Court of Ekiti State. The defendants filed a preliminary objection challenging the jurisdiction of the court to hear and determine the matter on two grounds, to wit; failure to disclose a reasonable cause of action and incompetence of the witness statement on oath for allegedly being offensive to section 13 of the Oaths Act. The Plaintiff, in an attempt to save his case, filed an application to amend his processes before the trial Court but the trial court in ruling on priority of application decided to take the preliminary objection on jurisdiction first. In its ruling, the trial court dismissed the Plaintiff’s case.

On appeal to the court of appeal, the decision of the trial court was upturned and case was restored to the cause list of the trial court for trial before another judge.

Being dissatisfied with the Court of Appeal decision, the Appellant contended before the Supreme Court that the witness statement on oath of the Plaintiff did not contain a verbatim statement of the oath in the Schedule of the Oaths Act. The apex court, per Agim JSC, relying on its previous decisions in the cases of Anatogu v. Iweka II[23] and Solola v. State[24] held that the absence of the oaths clause in the witness statement on oath does not invalidate the oath. The Court held that once the deposition is made before a person authorized by law to take oaths, the absence of an oath clause will not vitiate the oath. The court stated as follows:

“Let me consider the arguments of both sides on non-compliance with S.13 of the Oaths Act and the form in the 1st schedule thereto by the 1st respondent’s written statement on oath that accompanied the writ of summons.

 

The Court of Appeal correctly held that the absence of the words in the form in the 1st schedule to the Oaths Act or similar words in a written statement on oath sworn before a Commissioner for oaths is a mere irregularity as to form that cannot vitiate it. S. 13 of the Oaths Act provides that-

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“It shall be lawful for any Commissioner for Oaths, Notary Public or any other person authorized by the Act to administer oaths to take any and receive the declaration of any person voluntarily making the same in the form set out in the first schedule.”

The first schedule to the Oaths Act prescribe the oath thusly-

“I do solemnly and sincerely declare that I make the solemn declaration conscientiously, believing same to be true and by virtue of the provisions of the Oaths Act.”

Affidavits and other forms of written statements on oath usually contain this declaration as prescribed in the form in the first Schedule of the Oaths Act or similar words in the last paragraph. In our instant case, the only written statement on oath that accompanied the writ of summons and statement of claim did not contain the said declaration or any words to the like effect. But the 1st respondent who made the statement stated at the beginning of the statement that he was making the deposition therein on oath and the Commissioner for Oaths endorsed at the foot of the statement that it was sworn at the Registry of the High Court at Ado-Ekiti on 22-11-2011 before him.

Since the statement was made on oath and sworn before the Commissioner of Oaths, the absence of the declaration that was made conscientiously, believing same to be true and correct or like words in the written statement on oath becomes a mere irregularity or defect as to form that has no effect on the validity of the oath and the statement on oath.”[25]

Furthermore, the Court stated that the law is that any defect as to form does not vitiate an oath made before an authorized person in law, even if there was declaration contained in the deposition. It further held:

“Generally, the law does not allow the form of an oath or affirmation to vitiate the oath or statement made under the oath or allow the absence of oath or affirmation to prevent the admissibility of evidence that should be on oath. So where a statement, such as the 1st respondent’s statement in this case, was made on oath and sworn before the Commissioner for Oaths, the absence of the declaration prescribed in the Oaths Act that the deponent made the statement conscientiously, believing same to be true and correct or like words in the written statement on oath becomes a mere irregularity or defect as to form that has no effect on the validity of the oath and the statement on oath.”[26] 

More importantly, the Court held that no law precludes a witness from adopting a statement on oath even if it was not made on oath or sworn at all. The Court, at pages 158-159, paras. B-B; 168, paras. E-G, held thus:  “Section 4(2) of the Oaths Act states that  no irregularity in the form in which an oath or  affirmation is administered or taken shall:

(a) invalidate the performance of official duties; or

(b)invalidate proceedings in any court; or

(c) render inadmissible evidence in or in respect of which an irregularity took place in any(c)proceedings.

While by section 4(3) of the Act, the failure to take an oath or make an affirmation and any irregularity as to the form of an oath or affirmation shall in no case be construed to affect the liability of a witness to state the truth. In this case, even if the 1st respondent’s written statement was not made on oath or sworn at all, it would still be valid as the witness written statement intended to be given or given as evidence on oath in the proceedings and nothing precludes the witness from adopting it as his testimony when testifying on oath in examination in chief in open court. [Anatogu v. Iweka II (1995) 8 NWLR (Pt. 415)547Solola v. State (2005) 11 NWLR (Pt. 937) 460 Sule v. State (2017) 10 NWLR (Pt. 1628) 545 referred to; Buhari v. I.N.E.C. (2008) 4 NWLR (Pt. 1078) 546 referred to and distinguished.]”

In simpler terms, the Supreme Court might be understood to be holding in this case that the oath taken by the witness upon entering a witness box cures whatever defects as to form, that may exist in the deposition. This holding, in the writer’s view is a welcomed development as it de-emphasizes blind adherence to the dictates of procedural law at the painful expense of doing substantial justice to the parties’ dispute presented before the court. Little wonder that the Supreme Court berated the conduct of the learned trial judge who clearly in this case preoccupied himself with determining procedural issues, disguised as jurisdictional issues, whilst allowing the substantive case suffer for the eleven (11) year journey to the Supreme Court before it is being returned to the trial court for retrial before another Judge.[27]

CONCLUSION

In interrogating this question, it is heartwarming that our courts are maintaining their intolerance for technical justice, which in most cases defeats the merits of the cases before them. It is absurd, in the writer’s opinion, if in 2022, you find a witness statement of oath being held to be incompetent merely because it did not carry a paragraph of oath clause, when it was indeed deposed to before a person authorized to take oaths of that kind.

From the decision of the Court in ADEJUGBE v. ADULOJU (supra), it is settled without doubt that a witness statement on oath without an oath clause is nevertheless valid and can be competently adopted to become evidence before a Court. It however remains unclear if this principle can be stretched to include affidavits, which as has been shown earlier in this article, are fundamentally different from a witness statement on oath. Whilst it is convenient to assume that by parity of reasoning, the decision might apply, one can only hope that a suit fought on affidavit evidence (i.e., commenced by originating summons) gets up to the Supreme Court soon enough, affording the judex an opportunity to clarify the validity or otherwise of the affidavit.

The courts ought to stay true to ensuring that substantial justice triumphs over technical justice.  It is the writer’s view, that no sworn declaration should at this day and age is declared void merely because an oath clause that does not belie the other contents of the document is absent.

 

[1]Abdulkabir Badmos, is a Senior Associate with Mahmud & Co., Abuja-Nigeria. He may be contacted via aabadmos08@gmail.com.

[2](2012) 2NWLR (PT.1284) 285 (CA) at 308 Paras B-E; Luna C.O.P. Rivers State (2018) 11 NWLR (PT.1630) 269 (SC) at 290 Para A.

[3] Section 10, Oaths Act Cap O1, LFN 2004.

[4]Ezeudu v. John (2012) 7 NWLR (PT.1298) 1 (CA) at 15 Paras A-B

[5] (2017) LPELR-42551(CA) Pp 32 – 32 Paras B – F.

[6] (2021) LPELR-56025(CA) Pp. 18 – 23 Paras C – C.

[7] (2012) 7 NWLR (PT.1298) 55 at Pp. 97-98, paras. G-A.

[8] (2021) LPELR-55610(CA) Pp 64 – 68 Paras E – E.

[9] (2010) 10 NWLR (PT.1201)  1 at P. 34, paras. B-C.

[10] NGUN v. MOBIL PRODUCING NIG UNLTD (2013) LPELR-20197(CA) Per JOSEPH TINE TUR, JCA (Pp 31 – 32 Paras C – D)

[11] (1997) 10 NWLR (PT.525) 377 at 405-406, PARAS H-B, Per ACHIKE JCA.

[12] EBITEH v. OBIKI (1992) 5 NWLR (243) 599 at 618, para H, Per ADIO JCA

[13] (2007) 7NWLR (PT. 1033) 307 at 325, para H,

[14] Federal Republic of Nigeria, 1999 (as amended)

[15] Section 4 (2) and (3) of the 1999 Constitution (as amended).

[16] CAP E14, LFN 2004.

[17] Order 2 Rule 2 (2) (c) of the High Court of the Federal Capital Territory (Civil Procedure) Rules 2018; Order 5 Rule 2 (c) of the Lagos State High Court (Civil Procedure) Rules, 2019.

[18] ONWUFUJU v. OROHWEDOR (2020) LPELR-50767(CA) Per ABIMBOLA OSARUGUE OBASEKI-ADEJUMO, JCA (Pp 35 – 39, Paras F – E)

[19] (2004) 10 NWLR (pt.881) p.394

[20]  (2012) LPELR – 8033 (CA)

[21] (2017) LPELR-50170(CA) Per YARGATA BYENCHIT NIMPAR, JCA (Pp 13 – 14 Paras B – E.

[22] (2022) 3 NWLR (PT.1816) 131.

[23] (1995) 8 NWLR (Pt. 415)547.

[24] (2005) 11 NWLR (Pt. 937) 460.

[25] At page 157 PARAS B-H.

[26] At Pp. 158, para. A; 167-168, paras. H-A.

[27] Op. cit. See dictum of Agim, JSC at pages 160-162, Paras F-A.

The Concept Of Training Compensation And Solidarity Mechanism In Football | Omole Damilare

In the summer of 2017, one of the best players in the world : Neymar Da Silva Santos Júnior popularly known as Neymar Jr moved from Football Club Barcelona to Ligue 1 outfit Paris – St – Germain for a record breaking sum of €222m. The news was all over the media with many fans of the sport shocked at the humongous amount that was paid for his signature. A release clause that was hitherto thought impossible to trigger had finally being paid and following the regulations laid down by the Rules on Status and Transfers of Players (RSTP), the Catalan club had to release one of their best players for that amount. The news of the money was all up in the media with  a minor detail left out of the equation, the solidarity payments that was to be made to Santos : Neymar former club and trainer by Paris- St- Germain which amounted to over €9m.[1]

Solidarity payments are those that occur when a football player is still in contract but is transferred between two clubs belonging to different associations l.e a case of  international transfer. Clubs pay transfer fees, and up to five percent (5 %) of this fee is withheld to be used as the solidarity payment. These payments would then be made and distributed to all clubs that trained the player between his 12th and 23rd birthdays at a proportional rate developing on how long the player was at each club. Also, when a player signs his first professional contract, there is a sort of training money known as training compensation that is paid to the club that was involved in the player’s training.These monies are divided into two different Categories by FIFA : Training compensation and Solidarity mechanisms.

These principles were introduced due to Clubs complaints to UEFA and FIFA over the Bosman ruling which gave footballers more control over their transfers and gave the Clubs less power. Players could decide to wait out their contract and transfer to other clubs and the Clubs involved in their training would not get a dime out of the fees with no hope of recouping the money spent on training these players. [2]The need to maintain Player control and also give clubs  the opportunity to make profit on players training necessitated the need for Training Compensation. In FIFA circular 079, FIFA explained the reason for the Inclusion of rules guiding training compensation and Solidarity mechanism

The new regulations create a detailed system for the payment of training compensation. This system is designed to encourage more and better training of young football players, and to create solidarity among clubs, by awarding financial compensation to clubs which have invested in training young players. At the same time, care has also been taken to ensure that the amounts of training compensation do not become disproportionate, and unduly hinder the movement of young players”

ORDER NOW

They went further to state : ” The new club concerned is to distribute 5% of this compensatory amount to all the clubs where this player has played between the age of 12 and 23. This distribution of monies is meant as a solidarity contribution to the clubs involved in the training and education of the player.”

Training Compensation

Training compensation can be paid when a player signs his first professional contract as a footballer and whenever he is transferred up until his 23rd birthday. Either a paid transfer or a free one, the training compensation is mandatory. Only exceptions are spelt out in Annexe 4, act 2 ,Section 2 :

  1. the former club terminates the player’s contract without just cause (without prejudice to the rights of the previous clubs); or
  2. the player is transferred to a category 4 club; or
  3. a professional reacquires amateur status on being transferred.

This exception for category 4 clubs is due to the fact that they are extremely low clubs already and  it would be extremely hard to fork out enough money to serve as training compensation for any club.

In Annexe 4, art 3, Section 1. it states that once a player signs his first professional deal with a club, the Club with whom he signed the deal has to pay training compensation to every football Club/ academy who was involved in his training as a footballer within 30 days of the registration ( clubs hardly follow the 30 days rule though).

In it’s words :  “On registering as a professional for the first time, the club with which the player is registered is responsible for paying training compensation within 30 days of registration to every club with which the player has previously been registered (in accordance with the players’ career history as provided in the player passport) and that has contributed to his training starting from the calendar year of his 12th birthday. The amount payable is calculated on a pro rata basis according to the period of training that the player spent with each club. In the case of subsequent transfers of the professional, training compensation will only be owed to his former club for the time he was effectively trained by that club.”

Section 3 further makes provisions for cases whereby the football club has liquidated or ceased to exist, the money is to paid to the Football Association of that country where the club is located and the money directed towards youth development in that country. For example, a player trained by the now defunct Stationary Stores Club of Lagos who has now ceased to exist, the money will then be paid to the Nigerian Football Federation (NFF) who in turn would make invest the money into youth training and development in that country.

According to Art 4 section 1, football associations are also to divide their clubs into four different categories in accordance to the clubs training investments in youth development. The pre -determined sums are supposed to resemble the amount needed to train one professional player for one year multiplied with what FIFA/RSTP calls the “player factor” l.e the ratio of players trained in order to produce a successful player. Once these club category has been set, the training compensation is  calculated and gotten by multiplying the years which the selling club(s) trained and developed the player.

In 2019, FIFA in Circular No 1673  provides this chart to indicate what compensation may involve according to the respective confederation and the respective category. This chart was to be updated later.

Confederation Category I Category II Category III Category IV

AFC              USD 40,000 USD 10,000 USD 2,000

CAF               USD 30,000 USD 10,000 USD 2,000

CONCACAF    USD 40,000 USD 10,000 USD 2,000

CONMEBOL     USD 50,000 USD 30,000 USD 10,000 USD 2,000

OFC                    USD 30,000 USD 10,000 USD 2,000

UEFA                  EURO 90,000 EURO 60,000 EURO 30,000 EURO 10,000

The above chart illustrates the amount payable to these clubs under those continental federations. Worthy of note us that only UEFA and CONMEBOL clubs have Category 1 clubs.

Also, to make sure players between the age of 12 and 15 are not set at ridiculously high costs, the training compensation will be based on the training costs of Category 4 clubs. For example, if Tunde was trained from 12- 15 at a Category 2 club in Africa and then transferred to a category 1 club, it will be calculated thus : 4×2000 USD for his 12- 15 birthday and then 4× 30,000 USD Setting the total money at 128,000 USD.

Also, although there is not an obligation according to the RSTP to pay training compensation when a professional player transfers domestically, some National Football associations have transfer regulations that make training compensation payable for domestic transfers.

Solidarity mechanism.

Another way by which FIFA allows clubs to also make money from player sales and Transfers is through solidarity payments. Solidarity payments are those that occur when a football player is still in a contract but is transferred between different jurisdictions. When a player is being transferred and the transfer fees are paid, 5% of the transfer fees are held by the clubs and then distributed to all the clubs involved in his training between his 12th and 23rd birthdays at a rate depending on how long he stayed at those clubs. This is without including the training compensation paid to his club already.

This is spelt out explicitly in article 21 of the RSTP: ” when professional is transferred before the expiry of his contract, any club that has contributed to his education and training shall receive a proportion of the compensation paid to his former club (solidarity contribution). The provisions concerning solidarity contributions are set out in Annexe 5 of these regulations.

Annexe 5 of the RSTP further provides the rate of the solidarity payments as follows :

  1. a) Calendar year of 12th birthday: 5% of 5% of any compensation
  2. b) Calendar year of 13th birthday: 5% of 5% of any compensation
  3. c) Calendar year of 14th birthday: 5% of 5% of any compensation
  4. d) Calendar year of 15th birthday: 5% of 5% of any compensation
  5. e) Calendar year of 16th birthday: 10% of 5% of any compensation
  6. f) Calendar year of 17th birthday: 10% of 5% of any compensation
  7. g) Calendar year of 18th birthday: 10% of 5% of any compensation
  8. h) Calendar year of 19th birthday: 10% of 5% of any compensation
  9. i) Calendar year of 20th birthday: 10% of 5% of any compensation
  10. j) Calendar year of 21st birthday: 10% of 5% of any compensation
  11. k) Calendar year of 22nd birthday: 10% of 5% of any compensation
  12. l) Calendar year of 23rd birthday: 10% of 5% of any compensation

Just like Training compensation, Solidarity payments are obligatory when an international transfer takes place. However, football associations have regulations that also make it payable in cases of local transfers.

Also dissimilar with the training compensation, Solidarity payments does not stop and continue every time the a player is transferred either on a regular or loan basis. It is also dependent on a fee so free transfers do not count and it is only activated when a player transfers before the end of his contract for a fee. Training Compensation and Solidarity payments have helped a lot of Clubs stay afloat as it helps to bring a substantial sum of money in especially for clubs who have invested a lot in training a player and ensuring the success of his professional career.

The Writer, Omole Damilare is a 200 level student of the faculty of Law, Adekunle Ajasin University, Akungba Akoko and a sports enthusiast. He can be reached via +2349020837174 or Omoledamilare093@gmail.com

[1] Jonathan.J, (2017,Sep 4), PSG will pay Santos €9m in solidarity money from Neymar transfer – chief : https://www.espn.com/soccer/santos-fc/story/3204253/psg-will-pay-santos-9m-in-solidarity-money-from-neymar-transfer-president

[2] Euspen.A, ( 2022, Mar 31), Training compensation and solidarity mechanism: https://www.easportslaw.com/news/training-compensation-and-solidarity-mechanism

Dear Lawyers, Don’t Miss This Exclusive Hangout

Dear Lawyers, Don’t Miss This Exclusive Hangout

On the 29th of October, 2022 at 11.00am, a group of lawyers will be a part of an exclusive “Lawyers Hangout” holding at Park Inn by Radisson, Victoria Island Lagos.

Asides from the opportunity to network, there will be panel sessions on Law Firm Management, Technology and trends and also on content creation, some of the topics many lawyers have questions on.

A financial expert will also be available to help lawyers navigate their finances.

Other side attractions are Refreshments, Games and lots of networking activities.

To get more information on this event, visit @legallyYes on IG

Here is the link to register

Please make payment and register today on https://selar.co/z6xr  to secure a seat as we have limited seats  available.

Please contact +234 8149990849 for more details. (WhatsApp only ).

See you there.

Proudly sponsored by Legalnaija

See fliers below

Meet The Faculty At The Entertainment Law Training: Nkechukwu Otike-Odibi

Meet The Faculty At The Entertainment Law Training: Nkechukwu Otike-Odibi

Nkechukwu Otike-Odibi is currently the Senior Legal Executive, EbonyLife Media and has led the Legal department of the Company from 2020 till present. She obtained her LL.B from the prestigious University of Benin (UNIBEN) and her LL.M degree with a certificate in Entertainment Law from the University of Southern California (USC).

Her career path has seen her advice on a number groundbreaking international co-production and licensing deals with Netflix, Sony and Westbrook amongst others.

She was also instrumental in the research done for the Harvard Business School case study on EbonyLife Media, the first HBS case study on an African company led by a female entrepreneur. She is passionate about the African entertainment space and educating entertainment practitioners on the workings on the entertainment industry.

TRAINING OVERVIEW

Theme: Entertainment Law Mastery

MODULES

  1. a)Music Contracts & Agreements
  2. b)Film & media Agreements
  3. c)Negotiation & Dispute Resolution
  4. d)Talent Acquisition & Management
  5. e)Licensing & the Film Business
  6. f)Etiquette & public speaking

 

MEMBERS OF FACULTY

  1. Beverly Agbakoba-Onyejianya (Partner, Olisa Agbakoba Legal)
  2. Akinyemi Ayinuoluwa (Partner, Hightower Solicitors)
  3. Fola Alade (Partner, FOTEFA Partners LP/ Mediation Academy)
  4. Oyinkansola Fawehinmi (Foza) (Founder/President, DMCE.)
  5. Yeye Bush (Lead Etiquette Consultant, Manners Matter)
  1. Nkechukwu Otike – Odibi (Senior Legal Executive, EbonyLife Media)

 

DATE–29th and 30th September, 2022

TIME– 9.00am – 5.00pm Daily

REGISTRATION

Register for either the physical or virtual sessions.

Physical Session:
Fee: 70,000 Naira
Early Bird: 50,000 Naira (ends 7th Sept, 2022)
Registration Link: https://bit.ly/3znIb4w
Venue: NECA House, Alausa, Ikeja, Lagos

Virtual Session (ZOOM)
Fee: 50,000
Early Bird: 30,000 (ends 7th Sept, 2022)
Registration Link: https://bit.ly/3CbB6Y9

Get 10% Off the virtual session when you use the code: LEGAL9JA

PAYMENT DETAILS

Lawlexis International Limited

Fidelity Bank

4011176564

Participants will receive a certificate of participation.

NOTE: All payment and delegate information should be sent to lawlexisinternational@gmail.com before the date of training for proper registration. For more information and confirmation of payment, kindly contact us on 09029755663.

Meet The Faculty At The Entertainment Law Training: Akinyemi Ayinoluwa

Meet The Faculty At The Entertainment Law Training: Akinyemi Ayinoluwa

Akinyemi Ayinoluwa is a Partner and Co-founder at HighTower Solicitors and Advocates. His music law practice focuses on the representation of recording artists, songwriters, record producers, record labels, investors in music, and talent managers.  He is often recommended as a lawyer who breathes, drinks and eats music. Akinyemi’s past legal experience includes: Associate at Wemimo Ogunde & Co and Awokoya & Co.

Prior to qualifying as a lawyer, he was a songwriter, recording artist, composer and performer; he was the lead singer of the defunct 100 degrees boy band.  He has authored numerous articles in the field of music law, estate planning, commercial transactions, and regularly gets invited to deliver speeches and courses about these subjects.

Specialties: Intellectual Property Law- contract negotiation in TV industry, music, Production contracts, Recording contracts, Artiste Management deals, Synchronization deals,  Talent negotiations, endorsement deal negotiations, trademarks, music publishing, Debt Recovery, and Reputation Management.

On a small number of clients, Akinyemi functions as a business manager, as well as the lawyer. In recent years, Akinyemi has built up a formidable roster of producer clients from Afrobeats: Masterkraft, Blaq Jerzee, Northboi, Rexxie, Magicsticks, Jaypizzle, and many others. Akinyemi Ayinoluwa prides himself in helping clients understand the value of their intellectual property rights and to be mindful of the exploitation that is rampant in the industry.

TRAINING OVERVIEW

Theme: Entertainment Law Mastery

MODULES

  1. Music Contracts & Agreements
  2. Film & media Agreements
  3. Negotiation & Dispute Resolution
  4. Talent Acquisition & Management
  5. Licensing & the Film Business
  6. Etiquette & public speaking

 

MEMBERS OF FACULTY

  1. Beverly Agbakoba-Onyejianya (Partner, Olisa Agbakoba Legal)
  2. Akinyemi Ayinuoluwa (Partner, Hightower Solicitors)
  3. Fola Alade (Partner, FOTEFA Partners LP/ Mediation Academy)
  4. Oyinkansola Fawehinmi (Foza) (Founder/President, DMCE.)
  5. Yeye Bush (Lead Etiquette Consultant, Manners Matter)
  1. Nkechukwu Otike – Odibi (Senior Legal Executive, EbonyLife Media)

 

DATE–29th and 30th September, 2022

TIME– 9.00am – 5.00pm Daily

REGISTRATION

Register for either the physical or virtual sessions.

Physical Session:
Fee: 70,000 Naira
Early Bird: 50,000 Naira (ends 7th Sept, 2022)
Registration Link: https://bit.ly/3znIb4w
Venue: NECA House, Alausa, Ikeja, Lagos

Virtual Session (ZOOM)
Fee: 50,000
Early Bird: 30,000 (ends 7th Sept, 2022)
Registration Link: https://bit.ly/3CbB6Y9

Get 10% Off the virtual session when you use the code: LEGAL9JA

PAYMENT DETAILS

Lawlexis International Limited

Fidelity Bank

4011176564

Participants will receive a certificate of participation.

NOTE: All payment and delegate information should be sent to lawlexisinternational@gmail.com before the date of training for proper registration. For more information and confirmation of payment, kindly contact us on 09029755663.