(+234)9029755663 hello@legalnaija.com
Franchising: A Pathway To Entrepreneurial Success In Nigeria – Franklin Okeke

Franchising: A Pathway To Entrepreneurial Success In Nigeria – Franklin Okeke

by | Sep 5, 2016 | Uncategorized



Franchising is a
business model that businesses use to expand their brand and operational
footprint. A franchisor is a company, business or person that has developed a
system/name and grants a third party the right to operate a business under the
system and name in consideration of fees from the third party. According to the
International Franchise Association, a franchise is “the agreement or license between two legally independent parties which
gives: a person or group of people (franchisee) the right to market a product
or service using the trademark or trade name of another business (franchisor);
the franchisee the right to market a product or service using the trademark or
trade name of another business.’’ The essence is to enable the franchisee
enjoy commercial success in his business by ‘riding on the coat tails’ of the
franchisor. There is usually a fee (the ‘franchise fee’ or royalty) attached to
the use of the system.  

There is a popular
saying that owning a franchise allows you to
go into a business for yourself, but not by yourself. The advantages of
franchising includes – access to an established product or service which
already enjoys widespread brand-name recognition, effectively  giving the franchisee the benefits of a
pre-sold customer base which would ordinarily take years to establish, thereby significantly
increasing his prospect  of success. It provides
franchisees with a certain level of independence where they can operate their
business, and offer consumers the attraction of a certain level of quality and
consistency mandated by the franchise agreement. The franchisee is willing to
pay for association with time tested and trusted products and methods (which
would otherwise take him years to create), through the franchise arrangement.
Some examples of
franchises in the quick service restaurant (QSR) sector in Nigeria include: Mr.
Biggs’, Domino’s Pizza, Chicken Republic, Kentucky Fried Chicken (KFC),
Debonair’s Pizza, Tastee Fried Chicken (TFC) and Tantalizers. Four of the above
examples are homegrown Nigerian brands.
STRUCTURE
AND CONSTRUCT OF A FRANCHISE AGREEMENT
A franchise
agreement (FA) by its complex and technical nature is accompanied by a bundle
of Intellectual Property (IP) rights (trademarks, service names, patent,
designs, technological know-how etc.), which are protected and regulated not
only by the FA between the parties, but also by relevant laws regulating the
transfer of such, especially where there are cross border dimensions. The IP
rights are the basis upon which the FA is built because a franchisor would be
unwilling to enter into an FA if it feels its IP rights would not be adequately
protected.
Issues can arise regarding
the impact of a franchisor’s bankruptcy or liquidation on the FA and its
resultant effect on the franchisee. What would be the fate of the IP rights vis-à-vis the franchisee’s interest? If
a liquidator is appointed over the franchisor company, the liquidator takes
control of the company and can enforce its rights against franchisees. The
franchisee must continue to pay the agreed fees and adhere to the franchise
system. 
The role of the Liquidator
would be to sell the franchisor company to a third party or in the alternative
sell the assets of the franchisor which includes the IP rights. If the franchisor
company is sold to a third party (which is more preferable), then the FAs could
be assigned to the new owner and the franchisees can continue to do business as
usual. On the other hand, if the assets of the franchisor are sold, nothing
prevents the franchisee(s) from acquiring the IP Rights. It must be stated that
an FA does not terminate simply because the franchisor has gone into
liquidation. This is however subject to the express terms of the Agreement.
Franchise lawyers
spend a considerable amount of time drafting and negotiating FAs, since the FA is
the cornerstone of the franchise relationship and is likely to be in place for
a number of years. While no two FAs may be  identical, most include provisions such as the
grant of a trademark license, the right to operate the franchised business,
payment of fees, terms of the rights granted, limitations on how the franchisee
can use the franchisor’s trademarks, indemnity clauses, operational standards
and specifications, reporting requirements, default, termination,
post-termination obligations, non-compete clauses and disclosure of
confidential information, and procedures for dispute resolution.
However, these
clauses are subject to judicial interpretation. In Canada, the court recently
held that a ‘non-compete’ clause in an FA may not be enforceable in all
circumstances against the franchisee. A non-compete clause is a clause which
estops a party from engaging in a business similar in nature to that which the
particular agreement is centred upon. In an FA, these clauses are used to
ensure that the franchisee does not, with the know-how obtained from the
franchisor during the course of the relationship, operate a business which
would be in unfair competition with the franchisor and other subsequent
franchisees. However, a recent Canadian decision seem to suggest that the fact
that there is a non-compete clause in a franchise agreement, does not make it
enforceable. The Ontario Court of Appeal, in MEDIchair LP v DME Medequip Inc, 2016 ONCA 168, refused to enforce
a franchisee’s non-compete covenant because the evidence demonstrated that the
franchisor did not intend to open a franchised store within the restricted
territory.
The Court concluded
that non-compete covenants must protect “the legitimate interest of the
franchisor”, but cannot extend beyond that. In this case, the franchisee had
de-identified its franchise and opened a similar business in the same location;
however, because the franchisor did not intend to operate in the protected
territory after the franchise relationship ended, the franchisor was found not
to have the requisite legitimate interest to restrict competition by the
franchisee within that territory. However, where a franchisee is declared to be
in breach of these provisions, the franchisor can take out injunctions in order
to protect its position.  In the Nigerian
case of Andreas Koumoulis v. Leventis
Motors Limited, (1973) ALL NLR 789, the appellant was sued for breach of
his contract of service as spare parts Sales Manager. Clause 6 of the contract
provided that the appellant shall not for at least a year, after leaving the
employment of the respondent, operate a similar business as that of the
respondent within a 50 miles radius from any trading station owned by the
respondent. The Supreme Court affirmed the decision of the trial court and held
that the clause was enforceable against the appellant.
Finally, as with
any business relationship, there is a dispute resolution component to franchise
arrangements. Franchise litigation lawyers typically deal with claims such as
violations of franchise sales laws or franchise relationships laws,
misrepresentations during the franchise sales process, failure to pay amounts
due, failure to make required refunds, and failure to provide contracted support.
Franchisors typically try to control litigation somewhat with contractual
provisions that require the franchisee to submit certain claims to mediation or
arbitration or require the franchisee to litigate only in a specific forum. In
2013, an Australian franchise, Pie Face,
was on the wrong end of series of legal action from its franchisees for
misleading representation about potential sales and profitability. In order to
avoid litigation, it is essential that the franchisor and the franchisee
clearly lay out the duties and obligations of both parties, warranties (if any)
and expected timelines for the performance of the said duties.
LEGAL
FRAMEWORK FOR FRANCHISING IN NIGERIA
Till date, there is
no specific franchising legislation in Nigeria. However, it must be stated that
there are several regulatory provisions, existing in bits and pieces that affect
franchising in Nigeria. An example is the National
Office for Technology Acquisition and Promotion (NOTAP) Act Cap. N62 LFN 2004
which established NOTAP. It would however be erroneous to state that NOTAP Act
is the regulatory Act for franchising in Nigeria. This is because NOTAP deals
only with the transfer of technology from foreign entities. Arguably, if an FA
was to be executed between local entities there would be no need for NOTAP registration.
However, there are still some legal issues to be sorted such as trademark
registration, incorporation of entities etc. For example, a company considering
franchising may wish to form a new entity to offer franchises and must decide
what type of entity to form, how to organize it, and what organizational
documents are necessary. Due to the fact that franchisees buying into a system
will want the unrestricted right to use the name and mark used by the system, a
franchise lawyer will work with the franchisor to obtain registration of the
trademarks. Section 4(d) and (e) NOTAP
Act grants NOTAP the power to register franchise agreements involving foreign
franchisors. The section goes further to state that the agreement shall be
registrable if in the opinion of NOTAP, it involves the use of trademarks, the
right to use patented inventions, the supply of technical expertise in the form
of the preparation of plans, diagrams, operating manuals or any other form of
technical assistance of any description whatsoever, the provision of operating
staff or managerial assistance and the training of personnel etc.
By virtue of Section 7 of the NOTAP Act:
‘…no payment shall be made in Nigeria to
the credit of any person outside Nigeria by or on authority of the Federal
Ministry of Finance, the Central Bank of Nigeria or any licensed bank in
Nigeria in respect of any payments due under a contract or agreement mentioned
in section 4(d) of this Act, unless a certificate of registration issued under
this Act is presented by the party or parties concerned together with a copy of
the contract or agreement certified by the National Office in that behalf.’
Regulation
4 of the Income Tax (Transfer Pricing) Regulation 1, 2012, states
that where a connected taxable person has entered into a transaction or a
series of transactions to which the Regulation applies, the person shall ensure
that the taxable profits resulting from such controlled transactions are in a
manner consistent with the arm’s length principle otherwise the FIRS shall make
necessary adjustments. Arm’s length principle simply means that the conditions of a
controlled transaction should not differ from the conditions that would have
applied between independent persons in comparable transactions carried out
under comparable circumstances. The arm’s length principle is relatable to
franchising in that it seeks to guide the relationship between connected parties
(companies that share common control or participate directly or indirectly in the
management, control or profit of one another). For example, agreements between
Group and Holding companies, subsidiaries, companies with the same directors
etc. However, this provision would arise in the event of future collaborations/transactions
(JVs, Technical Services Agreement etc.) between the franchisor and the
franchisee as a means of preventing unfair advantage in the dealings of related
entities. There are other provisions of the NOTAP Act which deals with
franchising such as section 6 providing
for the basic requirements which must be included in the service agreement
(including FAs) for it to be approved by NOTAP.
The basic
problem with NOTAP regulating FAs between local and foreign entities is its
lack of transactional focus. Some of the provisions in the NOTAP Act are too
bureaucratic in nature without paying particular demands to the tenets and
dynamics of the franchise Industry. Unfortunately, the same lack of
transactional mindset is exhibited by many Nigerian regulatory agencies, whose
consequent poor performance weighs businesses down, and negatively impacts
competitiveness of Nigerian businesses.
INTERNATIONAL PERSPECTIVES
Other
jurisdictions have already begun to enact and amend their laws in order to maximise
the advantage of franchising. In the United States, some provisions of the California Franchise Relations Act (CFRA)
were revised through the California Bill AB-525 which was passed into law in 2015.
This sweeping new law gives franchisees across California more protections when
purchasing, transferring and terminating their FAs. Sponsored by the Coalition
of Franchisee Associations (CFA), the law affects new franchisees (i.e., those
who are granted or renew an agreement after January 1, 2016) and current
franchisees upon sale, transfer or termination of their FA. Specifically, the
law amends the CFRA to generally make FAs, more franchise friendly. The changes
made were more significant in the sale, transfer and termination of FAs. For
instance, the law changed the 30 day notice and cure period required before a
franchisor can terminate an FA to a 60 day notice and cure period.
The
franchise industry within the United States is showing no signs of slowing
down. Franchising and distribution continue to make up a large part of the
United States’ economy. According to The
Franchise Times of 2014, the top 200 franchise systems on its rankings had
total annual sales in 2013 of $590 billion.
In South
Africa (like Nigeria), there is also no singular law regulating franchising.
However, franchising is adequately provided for in South Africa’s Consumer Protection Act 2008, which defines
franchising and its various concepts. It also covers provisions on certain
consumer rights which afford protection to potential franchisees, chief among which
are:
(a)The
right to obtain a disclosure document when assessing a franchise opportunity fourteen
days before signing the franchise agreement. The disclosure document should
contain the number of franchise outlets, list of current franchisees,
franchisor’s turnover and net profits etc.; (b) the right to cancel the
agreement with no penalty within 10 business days of signing it (cooling off
period); and (c) Protection against unfair discrimination by suppliers; and (d)
protection against a franchisor receiving a direct or indirect benefit or compensation
from suppliers to its franchisees or its franchise system unless the fact
thereof is disclosed in writing with an explanation of how it will be applied.
CONCLUSION
In order
for Nigeria to fully leverage franchising as a tool for economic development,
it would be necessary to enact laws to guide franchise transactions. Franchising,
as a form of strategic alliance holds a lot of promise for economic development
by building up entrepreneurial capacity of local business people, indigenising
the economy, and contributing to halt capital flight; hence, it should receive
institutional support. FAs are more often than not, one-sided in favour of the
franchisor and as such, most franchisees would require protection through specific
laws. General contract law cannot fully embrace the challenges therein. An
example can be drawn from the Landlord-Tenant relationship. Before the passing
of the Tenancy Law of Lagos State 2011, it was the norm for Landlords to
collect multiple years rent in advance. Section 4 of the Law put a stop to this
oppressive act (although it is yet to be seen whether compliance has been as a
result of the positive impact of the law or due to the commercial
impracticability which has made such practice financially disadvantageous).
Nigeria should take a leaf in franchise regulation from United States and South
Africa. The Disclosure Document and ‘cooling off’ period that are required in
South Africa are additional points aiding the cause for franchise regulation in
Nigeria. This would be particularly important where the franchisor is a foreign
company; the franchisee needs to be adequately protected in a fair and balanced
FA. Proper franchise regulation would go a long way in unleashing the
entrepreneurial energy of Nigerians and also in creating an atmosphere which while
inviting investment is also conducive for growth.
 
Franklin
Okeke, Esq.  is a commercial lawyer focusing
on franchise arrangements and practices with Messrs LeLaw Barristers & Solicitors, Lagos
New CBN Guidelines For Banks On The Treatment Of Dishonoured Or Dud Cheques – Bolanle Oduntan, Esq.

New CBN Guidelines For Banks On The Treatment Of Dishonoured Or Dud Cheques – Bolanle Oduntan, Esq.

by | Sep 1, 2016 | Uncategorized


The Central Bank of
Nigeria has issued new guidelines to all banks on dishonoured or dud cheques.
It is instructive for individuals and businesses to understand these guidelines
which take effect from 28th June, 2016 and the consequence of issuing dud
cheques.
As reported in the media,
the CBN has installed additional regulatory measures against the issuance of
dud cheques by individuals and corporate customers in other to strengthen the
confidence and integrity of negotiable instruments issued within the country.
The key points to note in the new CBN Guidelines are that all banks are
mandated to;

1.    
Perform status check on all potential
customers to ensure they are not dud cheques issuers before granting credit
facilities to them or opening an account for them,
2.    
Forward the details of cheques issued by a
customers and returned “insufficient funds” whether presented over the
counter or through a licensed Credit Bureaux and the Credit Risk Management
System (CRMS) on monthly basis,
3.    
Cancel all unissued cheque books of
customers who have issued dud cheques three (3) consecutive times or more
across banks, and
4.    
Prevent all inter-bank cheques issued by such
customer for a period of five (5) years.
The guidelines  also
provides that the details of offending customers will be listed in the database
for a period of five (5) years from the date of submissions after which the
name will be eligible for removal. Also subsequent default following a removal
of an offenders name from the list will attract a permanent listing of such
defaulter in the Credit Bureaux database and such defaulter can only be removed
from the listing with the approval of the Central Bank.
It is also worth noting
that, the principal legislation criminalising the issuance of dud cheques
is the 1977 Dishonoured Cheques (Offences) Act. The rather
brief law makes it an offence for any person anywhere in Nigeria to induce
the delivery of any property or to purport to settle lawful obligations by
means of a cheque which when presented within a reasonable time is dishonoured
on the grounds that no funds or insufficient funds were standing to the credit
of the drawer of the cheque. This law has however been sparsely tested with the
sad consequence that there are professional debtors who obtain services under
the pretense that the cheques they issue will consequently be honoured by the
banks. 
The crux and key
provisions of the Dishonoured Cheques (Offences) Act are as follows:
1.    
Section 1
of the Act makes it an offence to obtain delivery of goods or credit by means
of a cheque that, when presented for payment not later than three months
after the date of the cheque, is dishonoured on the ground that no funds or
insufficient funds were standing to the credit of the drawer of the cheque in
the bank on which the cheque was drawn;
2.    
An individual found guilty of this crime is
liable to imprisonment for two years, without the option of a fine;
3.    
A body corporate found guilty of this crime
is liable to be sentenced to a fine of not less than N5,000. Note that a
minimum fine is prescribed by the law; a judge may apply discretion to increase
the fine applicable on a case by case approach; and
4.    
The Act in Section 2 however
provides for the lifting of the corporate veil where the offence involves a
body corporate. It provides that “where the offence is committed by a body
corporate is proved to have been committed with the consent of or connivance
of, or to be attributable to any neglect on the part of any director, manager,
secretary or other similar officer, servant or agent of the body corporate (or
any person purporting to act in any such capacity), he, as well as the body
corporate, shall be deemed to be guilty of the offence and may be proceeded
against and punished in the same manner as an individual.”
For businesses in general,
one of the factors considered when investors seek out promising ventures to
invest in, is the creditworthiness of the business (and in some cases that of
it key principal actors such as directors and principal members). What
creditworthiness says about a company is a company’s ability to meet its
financial obligations and pay its debts and the main way to improve on
creditworthiness is to pay bills and meet financial obligations on time.
Issuing a dud cheque is certainly not a way to achieving this.
At a time when direct and
foreign portfolio investment has plunged, importation of foreign capital
declined to a low of $647.1 Million in the 2nd Quarter of 2016 (according to Financial Times) and with the country officially in a
recession, it is important to note that future investments in Nigeria (when we
are able to come out of this recession) will come with even tougher scrutiny
and due diligence by investors, commercial banks and prospective business
partners.
The truth is that being a
serial debtor with an open display of opulence, is fast becoming an acceptable
trend. Start-ups looking to raise capital investment will among other
considerations undergo even greater scrutiny; not just the business
operations and financials but also its principal members to determine the
viability of prospective investments.
Five years is a long time
to have an individual or a corporate entity listed as an issuer of dude
cheques, in other words, as a person or organisation that chronically does not
honour its financial and business obligations. A lot of business goodwill and
credibility can be lost within this period with deep financial consequences.
Large businesses already
have internal credit rating systems, this move will go further by providing an
even larger pool of data to work with. Finally, this move by the CBN, coupled
with existing BVN infrastructure will ultimately help with a better enforcement
of existing laws as the appropriate prosecuting agencies will have a credible
list of offenders for prosecution.

***
 ‘Bolanle Oduntan is a corporate lawyer, litigator and ADR
practitioner. He advises start-ups, SMEs, multinational companies and
provides legal support and expertise. He practices in Lagos the commercial
capital and business nerve center of Nigeria and indeed West Africa.
**
If you have any question about this post, please contact ‘Bolanle,
your solicitors or financial advisers.
*
This article does not constitute legal or financial advice nor does it create a
contract between the reader and the writer.
Ed’s Note – This article
was originally published here. 
Photo Credit – here 

Reinforcing The Freedom Of Information Act Through Digital Citizens Engagement

Reinforcing The Freedom Of Information Act Through Digital Citizens Engagement

by | Sep 1, 2016 | Uncategorized


In any democracy, citizen participation is a basic principle because governments
derive their authority and power from the people. Therefore, Governments have
an obligation—and not just the discretion—to respond to the needs of the People
while Citizens have both the right and the responsibility to demand
accountability and to ensure that government acts in their best interests. It
is guaranteed by Section 14 of the Constitution of the Federal Republic of
Nigeria that; 

“POWER BELONGS TO THE PEOPLE OF NIGERIA from whom government through the
Constitution derives all its powers and authority… PARTICIPATION by the
people in their government shall be ensured in accordance with the provisions
of this Constitution.” – Section 14 (2) (a) and (c) Constitution of the Federal Republic of Nigeria
1999 – 
One of the most common ways by which governments try to ensure this right
of the citizens to participate is the enactment of the Freedom of Information
Act (FOIA). In Nigeria, the FOIA was passed since 2007. However, there are
questions about its effectiveness in enabling people to participate in
governance. When you visit the FOIA website you cannot miss the slogan “to provide unfettered access to public
information”. Yes, but then again, “unfettered
access” does not mean merely making information available to be obtained. Clearly,
empowering the people to participate means providing UNFETTERED ACCESS to
public information as opposed to making information available but limiting access
as we have it today. Under the current
arrangement, the FOIA requires that anyone seeking public information must
request for it. What this implies is that information is available but costly to
obtain – not easily accessed.  
Many Countries including the United States and the United Kingdom have
since realised the shortfall of the FOIA. These countries are driving
innovations that promote citizens’ participation and open governance in order
to reinforce the FOIA and their parliaments are helping to legitimatise the
reinforcement of the FOIA. This is illustrated by this excerpt from the United
States Open Government Act of 2007:
“The effective functioning of a free government like ours depends
largely on the force of an informed public opinion. This calls for the widest
possible understanding of the quality of government service rendered by all
elective or appointed public officials or employees.”
(2) the PEOPLE firmly believe that our system of government must itself be
governed by a presumption of openness;
(3) the Freedom of Information Act establishes a “strong presumption
in favour of disclosure” as noted by the United States Supreme Court in
United States Department of State vs. Ray (502 U.S. 164 1991), a presumption
that applies to all agencies governed by that Act;
(4) “DISCLOSURE, NOT SECRECY, is the dominant objective of the
Act,” as noted by the United States Supreme Court in Department of Air
Force v. Rose (425 U.S. 352 1976);
(5) IN PRACTICE, THE FREEDOM OF INFORMATION ACT HAS NOT ALWAYS LIVED UP TO
THE IDEALS OF THAT ACT; AND
(6) PARLIAMENT should regularly review THE FOIA in order to determine
whether further changes and improvements are necessary to ensure that the
government remains OPEN AND ACCESSIBLE TO THE PEOPLE and is always based NOT
upon the “NEED TO KNOW” but upon the fundamental “RIGHT TO
KNOW”
(Source: A
MOTION REFERRED TO 110TH COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM CONGRESS
– 1ST SESSION S.2488 UNITED STATES HOUSE OF REPRESENTATIVES DECEMBER 17, 2007)
– emphasis mine.
This holds true for Nigeria. It may be correct that
Information is available and the FOIA covers anyone who can follow through the
bureaucracy to request and obtain it but this is not the question. The question
is how accessible is public information? Not the bad news published in the
dailies but valuable information that can translate to actionable intelligence.
Beyond its availability, public information ought to
be; 
·       
Accessible – Without
barrier, whether it is solicited or unsolicited 
·       
Accurate – correct and not misleading
·       
Clear – understandable to
the vast majority, especially the ordinary citizens
·       
Useable – available before
and after the fact when citizens can still convert the information to
actionable intelligence
·       
Up-to-date –  Not outdated 
There is a New Age of Governance which is driven by advancements in ICT.   An age of massive people participation where
the ICT has empowered the people to mobilise, define public good, determine
policies, seek public good, and reform or replace institutions that do not
serve public good.
The day Hosni
Mubarak resigned as president of the Arab Republic of Egypt, Wael Ghonim,
Google’s Middle East marketing director and Egyptian activist, told CNN:  
 “If you truly intend to liberate a country,
give them the internet”. 
ICT enabled citizens’ engagement or digital citizens’ engagement has been
described by some as “Liberation technology”. Diamond (2010: 79) defines a
Liberation Technology as any form of information and communication technology
(ICT) that can expand political, social, and Economic freedom”. This is what
PETITIONA is all about.    
PETITIONA (www.petitiona.org) is a Launchpad for active engagement between citizens and government of
Nigeria in a way that it gives Citizens’ a stake in decisions that affect their
lives. Its aim is to shift the focus from a “need to know” to the fundamental right of citizens to demand to
know – “right to know”. PETITIONA
enables Nigerian Citizens to demand transparency, accountability and
responsiveness from public institutions while also offering a platform for
public servants and elected officials the chance to respond to citizens’
demands. 
“Often times, Citizens only
have a chance to participate in decisions that affect their lives during
elections. This happens once every four years. We believe this can change.
“PETITIONA” is a Launchpad
for two-way interaction between Citizens and Public Service Providers. Through
this platform, Citizens can actively participate by demanding the changes they
want to see – Public Institutions can also engage with Citizens by issuing
official response to such demands.
We are aware that the
Nigerian Government is trying to engage with Citizens trough the Presidency
Office for Digital Engagement (PODE) but Citizens Engagement is not about informing
Citizens about what is about to happen or what has already happened. Rather, Citizens
Engagement is a complete feedback loop which entails exchange of information
between Citizens and their Government. It is two-way feedback loop (top-down
and bottom-up). It is deliberately designed to strengthen responsiveness and
transparency which will ultimately lead to improvements in quality of public
service as well as more effective public institutions (Dayo Akin-Balogun).
PETITIONA is grounded in the relevant parts of the Nigerian Constitution
(especially Section 14 (2) (a) and (c), It also agrees with the spirit and
letters of the Freedom of Information Act which
mainly guarantees unfettered access to public information as well as other International Compacts on Citizens Participation, Open
Government, Equal Opportunity, Government Transparency, Accountability and
Responsiveness and so on. Its main aim is to
enable the participation of people in their government.  Sign up at www.petitiona.org –  Make your
voice count.
Dayo Akin-Balogun is a
Lawyer, Business Analyst and Founder of iSPEAK FOUNDATION (authors of
petitiona)
 
@dayo_speaks.  
Emmanuel Ohiri – Money Judgment;Unclogging the wheel of Justice

Emmanuel Ohiri – Money Judgment;Unclogging the wheel of Justice

by | Aug 30, 2016 | Uncategorized



Introduction
The
legal mantra, “a winning party has a right to enjoy the fruit of his judgment”
has been greatly abused in Nigeria. Justice delayed is justice denied even
though litigation under the Nigerian judicial system is more often than not
protracted. Once a claimant initiates an action, it is reasonable for him to
expect that the match will result in a penalty shootout after warming up,
playing till full time and extra time. This is largely due to the various
administrative hurdles, professional antics and unscrupulous practices, which
plagues the administration of justice system in Nigeria (a huge topic for another day).

 A
tool usually deployed by legal Practitioners to choke the delivery of justice
and ensure the triumphant party merely obtains a Pyrrhic victory is by
obtaining an order for stay of execution. This order prevents the successful
party (Judgment Creditor) from being rewarded by the losing party (Judgment
Debtor). Whilst the rules of court provide for various ways of enforcing
judgments, the defeatist attitude of litigants in Nigeria and sadly as well as
their solicitors, lead to frivolous applications for stay of execution before
the ink is dry on the judgment. [I may have prepared one or more of such applications
in my experience ;-)]. For fear of being chastised by the Court of Appeal (in the case of trial courts),
and under the guise of preserving the “Res”, Nigerian courts have cultivated
the habit of granting applications for stay of execution of judgments it has
toiled over the years to deliver. In my opinion, these courts usually fail to
consider the circumstances of each case and or the weight of evidence adduced
by the Applicants before granting such orders. This is unjust especially in the
case of money judgments.
Stay of Execution of a Money Judgment
A
Judgment Creditor is entitled to reap the benefits of a judgment delivered in
his favour until the same is set aside. Nevertheless, an unsuccessful litigant
may apply for stay of execution but he must show substantial reasons for
wanting to deprive the successful party of the fruits of his judgment. There
are however exceptional and special circumstances that may warrant the
deprivation of a successful party of the fruits of his money judgment. These
circumstances are entirely at the discretion of the court. The court is
required to consider the equal right to justice of both parties. The Supreme
Court’s decision in U.B.N
Ltd v Odusote Bookstore Ltd may shed some light on this point,
as the court held: A
discretion that is based (sic) in favour of an appellant for stay but does not
adequately take into account the respondent’s right to justice is a discretion
that has not been judicially exercised”.[1]
In
considering the parties’ equal right to justice, the law stipulates that one of
the circumstance where a Judgment Debtor should be allowed to retain the
judgment debt pending appeal, is where there is a pending valid appeal before
the superior court and the Judgment Creditor consents to such an arrangement.
See U.B.N Ltd’s case
referred to above. Consequently, where an appeal has not been entered at the
superior court and the Judgment Creditor has not consented to the Applicant
retaining the judgment sum, the court has no power to permit the Applicant to
hold the same.
 Responsibility of the Court
As
an application for stay of execution is an exercise of the equitable powers of
the court, an Applicant for a stay of execution of a money judgment must
approach the court with clean hands by exhibiting in its affidavit, its last
audited annual statement of account to provide the court with full and frank
knowledge of its financial position. The court has held that in the case of a
company, the law enjoins it to prepare an audited annual statement of account showing
its assets, which will include its reserve (if any) and liabilities. Where it
fails to do so either through neglect to disclose relevant facts or suppression
of them, it has not shown readiness for fairness and equity[2]. 
This
means that the equitable powers of the court may only be invoked where the
Applicant had provided the court with detailed proof (in its affidavit) of its
assets and liabilities. This requirement is more critical where the Applicant
has either claimed poverty or opulence as the basis for grant of stay of
execution. The requirement formed the basis of the decision of the Court of
Appeal in Chukwu v.
Onyia[3], where the Court of Appeal per Uwaifo JCA held as
follows: “That is the only
way the court can best exercise its discretion to grant or refuse the stay.
Bare assertions of poverty or opulence by him do not assist, afortiori when the
facts are suppressed or misrepresented by him. Arguments based on them make a
ritual of the principles and in effect invite the court to exercise its
discretion on nothing other than those principles, or indeed on false facts,
instead of upon true and full facts guided by the principles. This does
incalculable harm to the course of justice.”(Underlining ours)
 Conclusion
It
is important that the court should refuse to grant applications for stay of
execution of a money judgment where Applicants fail to exhibit their financial
statement or a breakdown of their assets and liabilities towards enabling the
court invoke its equitable powers. A Judgment Creditor should not be denied the
fruit of his judgment on insubstantial grounds or lack thereof in the
Applicant’s affidavit. At the very least, the court should invoke its power to
order the payment of the judgment debt to the Chief Registrar of the court, who
shall in turn deposit the same into an interest yielding deposit account in a
reputable commercial bank pending the determination of the appeal[4].
[1]
(1994) 3 NWLR (Pt 331) 129 at 150 – 151
[2]
Guinea Insurance Plc. v. Monarch Holdings Ltd. (1996) 3 NWLR pt. 436 p.365 @371
G-H
[3]
(1990) 2 NWLR pt.130 p.80 @84-85 H-B
[4]
Kwarapoly vs. Oyebamiji (2008) 3 NWLR (part 1075) page 459, Kopek Construction
Ltd vs. Ekisola (1998) 10 NWLR (part 568) page 120.

Emmanuel Ohiri
TNP

Emmanuel Ohiri is a vibrant and dynamic young lawyer with a high level
of intellectual curiosity, passion for perfection and tactical
proficiency.

Ed’s
Note – This article was originally posted here.
TyLegal – Is life imprisonment suitable for rapists?

TyLegal – Is life imprisonment suitable for rapists?

by | Aug 30, 2016 | Uncategorized


The Kaduna state government has proposed life imprisonment
for rapists, especially where minors are involved. Try as one might, it is
difficult to comprehend why a man will rape anyone at all, much less a minor.
Short of being mentally deranged, I cannot think of any excuse for such…

While the proposition of life imprisonment is very
commendable, some people are of the opinion that it is a lenient punishment.
They have instead opted for other penalties such as maiming, castration,
various forms of inhumane treatment or the definite price, the death penalty.
Though some may argue that these are extreme measures and are
not in line with the laid down laws, it can also be argued that the victims of
these rape incidents are marred for life. They suffer various levels of
self-blame, depression, anger, shame, intimidation and fear. They are exposed
to sexually transmitted diseases, unwanted pregnancies, uterine fibroid,
amongst many other negative effects and only a few are able to rise above such
horrific incidents to live a fulfilling life. Some who are sexually abused at a
young age may require treatment for the rest of their lives.
Be that as it may, we must also bear in mind that both male
and female are affected by these heinous acts. Lots of young boys and girls
these days suffer different forms of sexual abuse from older ones, especially
those they trust. This makes it difficult for them to trust reliable people who
truly care about them when they grow up.
Victims of sexual assaults are advised to do all or any of
the following:
§  Go
to a safe place, call a family member or trusted friend who can provide the
needed support.
§  Preserve
all physical evidence and report the crime to the police immediately.
§  Get
medical care as soon as possible.
§  Write
down as much as can be remembered including a description of the attacker.
§  Speak
with someone who is trained to assist sexually assaulted victims.
The healing process is usually a long one and some victims of
sexual assault tend to suffer from the effects for the rest of their lives.
Which brings us back to the question, why should the perpetrator of a sexual
assault be allowed to carry on living, even if it is behind bars? Perhaps, the
world would be a safer place without such perpetrator in it?
What do you think? 
Photo credit:LiveLeak

Ed’s Note – This article was originally published here

Busayo Adedeji – Corporate and Individual Liability Under The Immigration Act (2015)

Busayo Adedeji – Corporate and Individual Liability Under The Immigration Act (2015)

by | Aug 29, 2016 | Uncategorized

The immigration act was
recently reviewed/amended and same was signed into law by former president
Goodluck Jonathan before leaving office in 2015. The law (upon signing by the
then president) immediately became effective as the principal law regulating
immigration in Nigeria.
Some of the sections
detailing corporate and individual offences/punishments under the act are
highlighted below:

  • The act expressly prohibits persons’ order
    than citizens of Nigeria from accepting employment anywhere in Nigeria (except
    same is offered by the government) without the consent of the Comptroller
    General of Immigrations (CGI) being first sought and obtained.[1]
  • The act
    goes further to state “no person other
    than a citizen of Nigeria shall on his own account or in partnership with any
    other person, practice a profession or establish or take over any trade or
    business whatsoever or register or take over any company with limited liability
    for any such purpose, with the consent in writing of the Minister”    .[2]
  • The
    act states that any person desirous of entering Nigeria shall produce to an
    immigration officer consent of the CGI failure of which attracts a fine of One
    Million Naira (N1,000,000) or deportation
    or both as a prohibited immigrant.[3]
  • Where a person formerly exempted from the
    foregoing provisions of the act ceases to be so exempted, he shall be deemed as
    a person seeking entry in to Nigeria for the first time and the foregoing shall
    apply to such a person.
  • The CGI may revoke a permit or reissue it on
    such terms and conditions as he deems fit, failure to comply with the
    directives of the CGI attracts imprisonment for a term of 5 years or a fine of
    Two Million Naira (N2,000, 000) or
    both.
  • Any expatriate
    person who fails or neglects to apply for the:
1.  Regularization of his stay in Nigeria
within the stipulated period;
2.  Renewal of his business visa, transit,
visitors pass, or Temporary Work Permit (TWP); or 
3.  Renewal of his residence permit after thirty
(30) days of the expiration of same is guilty of an offence and is liable to
imprisonment for a term of three years or a fine of Five Hundred Thousand Naira
or both.[4]
  • The act expressly prohibits the discharge,
    re-designation and change of employment of an expatriate employee without the
    consent and approval of the CGI first sought and obtained. The implication of
    this is the employer, employee and their dependents (if not Nigerian citizens)
    being deported and business wound up.[5]
  • It is an offence under the act to alter,
    produce or reproduce a travel document.
  • The act also makes provisions for punishments
    for offences that have not been captured by the act, the punishment in such
    cases are imprisonment for a year or a fine of One Hundred Thousand Naira (N100,000), in the case of the offender
    being an agent the punishment shall be imprisonment for ten years or a fine of
    Two Million Naira (N2,000,000).
It is pertinent to state
that the new immigration regime under the new CGI has shown zero tolerance for
issues relating non-compliance, has investigations and invitations of erring
corporations are the order of the day. Despite the foregoing corporations and
individuals alike should always seek the assistance of an immigration lawyer
when immigration issues arise.
Busayo Adedeji is an Associate in the
corporate and commercial, corporate immigration, employment and labour, banking
and corporate finance practice group of Bloomfield Law Practice; and advises multinational
and local clients on matters such as regulatory compliance, trade unions,
labour and employment, dispute resolution etc.
Image
credits: https://tarrantgreenparty.wordpress.com

[1]
Section 36(1)(a)
[2]
Section 36(1)(b)
[3]
Section 36(2)
[4]
Section 57 (5)
[5]
Section 58

 

Chukwudi Ofili – Perfection of Security Documents and the Practice of Upstamping in Nigeria

Chukwudi Ofili – Perfection of Security Documents and the Practice of Upstamping in Nigeria

by | Aug 29, 2016 | Uncategorized


In Nigeria, debts are typically secured
through the use of guarantees, mortgages, fixed and floating charges and
pledges of real, personal, tangible and intangible property belonging to the
debtor or a guarantor of the debtor. Security created in favour of a lender for
providing debt financing is documented using different forms of security
documents.

In order to perfect security documents,
such documents must be stamped at the stamp duties office and registered at the
Corporate Affairs Commission (CAC). For certain assets such as real property
which require the consent of the Executive Governor of the state where the real
property is situate, such consent must be obtained to perfect the security
created under such document. The statutory obligation to stamp documents that
transfer or create a proprietary interest in assets is provided for under the
Stamp Duties Act (SDA) with specific emphasis on sections 3, 23 (1) and (4) of
the SDA. In addition, a charge created by a company to provide security to a
lender is void against a liquidator and such lender (as a creditor of the
company) unless it is registered with the CAC within 90 days of creation.
However, in large financing
transactions, the stamp duty payable in respect of a security document could be
very high (and in certain cases, prohibitively so).  It is not uncommon
for lenders to a financing to agree that the borrower may pay stamp duty on
only a portion of the secured amount rather than the whole secured amount, with
a further assurance from the borrower that the full stamp duty will be paid on
a future date or upon the occurrence of certain events.  This practice is
known as “upstamping”.  Until the security document is upstamped, any such
lender is only protected up to the amount expressed to be secured and a lender
may lose priority to any subsequent security granted on the charged assets
during the period between the initial stamping and the full upstamping of the
security document.
The Implication of Upstamping on
Lenders
Neither the SDA nor the Companies and
Allied Matters Act (CAMA), stipulate that a security document that secures a
credit facility must be stamped and registered for the exact amount extended to
a company or person. However, where a security document is stamped for an
amount lower than the facility amount, the lenders will only be permitted to
prove for and realise the security for the secured amount i.e. the amount
for which that lenders has stamped and registered his security. CAMA
recognises the right of parties to commercially structure their transactions
such that the security documents can be stamped for an initial amount and then
subsequently up stamped for an additional amount.
Pursuant to section 202 of CAMA, any
additional amount for which a security document is up stamped will be valid and
effective to the extent of such increased amount. The lenders would only be
permitted to prove and realize the security for the full facility amount or a
higher amount only upon the security document being up stamped (i.e. payment of
additional stamp duty) to cover the facility amount or the higher amount being
sought to be recovered.
Potential Risk to Lenders in Enforcing
Security
There is a risk that prior to the
lenders up stamping the security document for the full facility amount,
intervening third party interests might have arisen (i.e. under other third
party security), thus raising pertinent priority issues where another creditor
has acquired an intervening proprietary interest. If prior to an up stamping to
secure additional amounts, another creditor advances money to the borrower, and
perfects its security interest over the same assets that form the
subject-matter of the lenders’ security, that creditor will rank ahead of the
lenders’ interest as it relates to the subsequent up stamped additional amount
to be secured but lenders will still have priority in respect of original
amounts for which the security was perfected.
Hardening Period
Another risk lenders face in an
upstamping scenario is that an agreement to upstamp to secure additional
amounts, might be viewed as a fraudulent preference in the event of insolvency
of the borrower. See section 495 of CAMA. This “hardening period” rule,
and the resultant effect is that the additional / up stamped security interest
would be void against the liquidator of the borrower and enable the liquidator
claw-back any such payments or cancel such acts. Arguments can be made whilst
referring to decisions of English courts on the fact that a preference is not
fraudulent by essentially showing that the dominant motive for such preference
is not to prefer certain creditors to the detriment of others. It should
however be noted that such arguments are only persuasive to Nigerian courts as
Nigerian courts are not bound by the decision of English courts; they are only
of persuasive authority.
On the flip side, where the dominant
motive was to carry out a pre-existing obligation, or to keep on good terms
with a creditor, it is likely that Nigerian courts will follow English courts
in holding that in such circumstances the preference is a fraudulent
preference. It is important to note that there are no Nigerian law decisions on
this point, however, Nigerian courts are likely to follow English courts on
this point.
Addressing the Residual Risks of
Upstamping
The risks identified above, while
adopting the upstamping regime, can be mitigated by:
1.     Establishing an
upstamping regime in the relevant loan documentation;
2.     Using a negative
pledge clause restricting the borrower from creating any additional security
over its assets;
3.     Using automatic
crystallization provisions in the security documents for floating charges to
crystalise into a fixed charge when there is an attempt to create security over
the assets in favour of a third party; and
4.     Establishing a stamp
duty escrow account to hold the balance of the perfection costs to enable
lenders upstamp at will.
The options highlighted in (1) to (4)
above are by no means exhaustive as other options have not been discussed in
this paper.
 Chukwudi Ofili is
a Senior Associate in the corporate and commercial, banking and corporate
finance practice group of Bloomfield Law Practice; and advises on matters such
as local and foreign currency syndicated lending, leases
transaction/structured/project finance, structured trade finance, energy and
natural resources, due diligence issues and advisory services, foreign
investment advisory services, taxation and real estate.
Ed”s Note – This article was originally published by the author here. 
Supreme Court Rules Igbo girls can inherit property

Supreme Court Rules Igbo girls can inherit property

by | Aug 23, 2016 | Uncategorized

The Supreme Court recently delivered a landmark judgment that will alter the domination, subjugation, discrimination and humiliation suffered by women in Igboland from time immemorial. In the judgment, the apex court voided the Igbo law and custom, which forbids daughters from inheriting their late fathers’ estate. The Court declared that the tradition is discriminatory and conflicts with the provisions of the Nigerian Constitution. 


The court held that the practice conflicted with Sections 42(1)(a) and (2) of the 1999 Constitution of the Federal Republic of Nigeria on the fundamental freedom from discrimination granted every Nigerian. The judgment was on appeal marked: SC.22/2014 filed by Mrs. Lois Chituru Ukeje (the wife of the late Lazarus Ogbonna Ukeji) and their son, Enyinnaya Lazarus Ukeje, against Mrs. Gladys Ada Ukeje, the deceased’s daughter.


Gladys had sued the deceased’s wife and son before the Lagos High Court, claiming to be one of the deceased’s children and sought to be included among those to administer their deceased father’s estate. The Supreme Court found that she was a daughter of the deceased and that she was qualified to benefit from the estate of their father who died in Lagos in 1981 without writing a will on how his estate should be shared among his descendants. The Court of Appeal in Lagos to which Mrs. Lois  Ukeje and Enyinnaya Ukeje appealed, upheld the decision of the trial court, prompting them to appeal further to the Supreme Court.

In its judgment on Friday, June 1, 2016, the Supreme Court held that the Court of Appeal, Lagos was right to have voided the Igbo Native Law and Custom that disinherited female children.

Justice Bode Rhodes-Vivour who read the final judgment held that “no matter the circumstances of the birth of a female child, such a child is entitled to an inheritance from the late father’s estate. Consequently, the Igbo customary law, which disentitles a female child from partaking in the sharing of her deceased father’s estate, is a breach of section 42(1) and (2) of the constitution, a fundamental rights provision guaranteed to every Nigerian.”  The said discriminatory customary law is void as it conflicts with section 42(1) and (2) of the constitution.

The Anambra State Women Association in Lagos (ASWAL), a socio-cultural organization, comprising women representatives of 177 communities in Anambra State residing in Lagos State, has commended the Supreme Court for the judgment. The Anambra State House of Assembly Speaker Rita Maduagwu, told the ASWAL President Dr. (Mrs.) Nkiru Ifekwem, who led other members of the group to the House that they had already domesticated it.

We commend the Supreme Court for its bold decision, because it is a judgment that is long overdue. Over the years, women have contributed to the development of the society, in some cases more than the men, but when it comes to inheritance they are sidelined. This, naturally, makes them feel inferior to men, which is very unfair and inhuman.

Though a judgment can only give what is sought, we hope a similar judgment on wives’ rights to inherit their husbands’ estate is on the way.  Dr. Ifekwem said the verdict meant that every female child in the South-East shall henceforth get a share of their fathers’ and/or husbands’ property, if the deceased had no male child.

We hope that even where the deceased had a male child, a female child would still be entitled to a part of his estate as her inheritance. A wife should get a portion of her husband’s estate as her inheritance as well.


The issue of denying female children inheritance is not peculiar to Igboland. It is practised in many parts of the country. We, therefore, encourage civil society organisations to do more and pressurize State Houses of Assembly to domesticate this judgment and pass it as an edict in every part of Nigeria.


Source- www.dailytrust.com.ng
Osinuga Damilola – Lease as an Alternative Financing Vehicle in Ship Acquisition

Osinuga Damilola – Lease as an Alternative Financing Vehicle in Ship Acquisition

by | Aug 18, 2016 | Uncategorized


Acquisition of ships is
fundamental to the shipping business. Notwithstanding the mode of acquisition,
i.e. whether by an outright purchase, construction of a new ship or otherwise,
ship financing continues to be an integral part of ship acquisition. Financing
ship acquisitions can be effected through the provision of debt or equity.
The most common means is
to obtain a loan for part or all of the purchase price otherwise known as debt
financing. However, due to the nature of the marine business, many financing
institutions are reluctant to finance the acquisition of ships without adequate
security or a good credit rating with such financial institution.

With the advent of “lease
structured financing” debt and equity, as the most common ways of financing
ship acquisitions appear to have found a competitor. Lease structured financing
is a popular and well-tested concept among airlines and other aircraft
operators.
Ship Lease Operation
The lease is perhaps best
described in general terms as a conveyancing method where the possession of
property passes but ownership or title in the asset does not pass to the
purchaser. A somewhat more precise legal definition of a lease is that it is a
contract through which the owner of property (the lessor) conveys to another
person (the lessee), in consideration of payment as agreed, the right to
possession and use of the property for an agreed period.
There are basically two
types of lease:
1.    
Operating Lease; and
2.    
Finance Lease
Operating Lease
Operating lease is a lease
in the real sense. Outside of shipping it is widely used for rental (or hiring)
of equipment and durable consumer items. The risk usually remains with the
lessor who maintains the asset and the lessee normally has the discretion to
terminate the lease, at the end of which the property reverts back to the
lessor. However, if so provided in the contract, either party may have the
right to cancel the lease. A typical example of the operating lease is the leasing
of containers in the shipping industry, where container lines lease containers
from container leasing companies.
As far as ships are
concerned, where an operating lease is in place, it is usually in the form of a
short or mid-term bareboat charter after which the lessee will return the ship
to the lessor. The lessor assumes such risks as the technological obsolescence
of the ship and the re-employment of the ship after the lease period. During
the charter period, the lessee acts as if he owns the ship and the lease
payments do not involve an amortization of the leased property; nor is there an
option to purchase in favour of the lessee. Recently, there has been an
increase in the use of short-term bareboat charters with an increasing number
of financial institutions willing to provide ships for this market. Although it
is not a financing vehicle in strict terms, it is referred to as an alternative
source of finance.
It is notable that there
is another quasi-operating lease where the lessor may provide the manpower and
services required to operate the equipment. In aviation this is referred to as
“wet lease” while in shipping it is referred to as time charter. Time
chartering is not pure equipment leasing because the provider of the ship, i.e.
the owner, provides the crew and is responsible for the navigational
operation of the ship. The charterer is thus not in full possession of the
ship. However, it is also an important and convenient way for a shipowner to
expand his fleet in peak trading conditions because he can completely control
the commercial operation of the ship. In this sense, time charter is very much
akin to an operating lease.
It is pertinent to note
that in recent times time-charter periods especially for big container ships
have increased. This, together with the shortening of bareboat charter period,
denotes that operating leases are playing an increasingly important role in the
supply of tonnage for shipping companies.
Finance Lease
Finance lease transfers
all the risks and rewards incident to ownership of an asset. This type of lease
is typically used for long –term finance of ships and covers a substantial part
of the ship’s economic life. The ship is usually fully amortized (including the
lessor’s returns on his investment). The lessor, whose main role is as
financier gets most of his pay-out in respect of the ship because the total of
the hire amount and payments are calculated to cover the cost or purchase price
of the ship, the additional expenses which the lessor might incur as well as
part of the lessor’s profit. The lessor also has little involvement with the
asset beyond owning it, and all operating responsibilities including
procurement of insurance fall on the lessee who, in the event of early
termination, must fully compensate the lessor (usually the lessee anticipates a
substantial down payment. This binds the lessor to the sale. If the lessee
defaults, he loses his down payment as well).
Although the finance lease
generally appears on the lessee’s balance sheet, its main attraction to
shipping companies is that it brings tax benefit by depreciating the ship’s
value against profits and by assisting companies with high profits but no
suitable investment of their own to obtain tax relief by purchasing a ship.
Under a finance lease scenario, the ship, built to the lessee’s specification
(if a newbuilding), or chosen by the lessee (if it is a second hand), is
purchased by the company providing the finance (the lessor) and leased under a
long-term agreement (usually a bareboat charter) to the shipping company
(lessee) which may purchase the property at a nominal price after the primary
leasing period.
The advantages of ship
leasing, as argued by practitioners, are similar to those claimed by the
classical economists. These advantages are focused on the two major categories,
tax benefit and financial position improvement.
Tax Benefit
The tax advantage argument
is perhaps the strongest justification for using lease as a financing vehicle
in shipping. Experts have pointed out that the tax benefits accruing out of
leasing are of predominant interest. With leasing, the most significant tax
benefit is the deferral of tax liability on capital allowance. The rate of hire
will reflect the immediate use of the tax allowance by the lessor. Capital allowances
can be used as set offs against taxable profits. The lessee would favour
leasing as a financing vehicle in shipping because the lessee is usually keen
on ‘disguising’ a finance lease in the form of an operating lease to derive the
off-balance sheet benefit.
Financial Position
Improvement
The scarcity of financing
from financial institutions or other financing options for shipping lines has
created a space which is now filled by leasing companies which have easier
access to capital funds. In such cases, it is of great value for the carriers
to have access to diverse sources of capital that will assist them with their
fleet expansion and renewal plans by acquiring larger, modern and
fuel-efficient vessels and achieving the necessary economies of scale to remain
competitive. In a cyclical and very capital intensive industry, such as
shipping, the lease can preserve the lessee’s working capital and its financial
position through long-term repayment structure (often longer than the one
offered from banks) and effective cash management through matching the rental
profiles with income streams (cashflow). Moreover, the lease structure permits
the lessor to lock in carriers to long-term charter arrangements and fixed
rates that are oblivious to the volatility of the spot charter market and thus
achieve a secure revenue base and higher financial leverage than other
investors in the ship financing market.
Furthermore, in comparison
with the traditional debt financing from financial institutions, lease
financing differs in the sense that the lessor retains legal title/ownership of
the ship during the lease period which provides the lessor with a built-in
security that offsets the absence of a loan agreement and ship mortgage in the
lease financing ‘equation’. Despite being the owner, the lessor does not have
possession of the ship since such right is retained by the lessee.
Conclusion
Despite the current
downturn in the shipping market, there are good grounds to believe that there
is still overflow of available finance in the market. In the last few years,
there has been significant growth and expansion in the leasing business.
Similarly, there has been an upsurge inleasing transactions, particularly
amongst the Chinese commercial banks, the subsidiary leasing companies of
banks, hedge funds and financial institutions fueling this growth and becoming
major capital providers to the shipping industry with an intention to further
expand and diversify their portfolio of ships and establish their presence in
Europe, America and Africa.
It can be argued that the
lease structure highlights the polarisation of the shipping business. As a
result, the pure asset players, such as the lessors have strengthened their
financial position while the carriers have become weaker. This has changed the
traditional notion of the ‘shipowner’ as we know it, in the sense that the
leasing companies are now the large shipowners.
Being a sophisticated
structure, whether or not the purchaser will qualify for a the ship lease will
depend on the parties’ intentions, credit ratings, operational decisions and
market status. Despite its restrictions, the prospects of the finance lease
seems promising given the increasingly popular trend of outsourcing the asset
management services of shipping companies. As a relatively new alternative in
the international financial arena, ship lease is still developing and
undergoing tests.
Damilola Osinuga is an
Associate in the Shipping and Oil Services practice group of Bloomfield Law
Practice, Nigeria
Ed’s Note – This article
was originally posted here.
Tanimola Anjorin – An exposè on the Arbitration procedural stages

Tanimola Anjorin – An exposè on the Arbitration procedural stages

by | Aug 15, 2016 | Uncategorized

Arbitration as a better alternative to litigation: An
exposè on the procedural stages[1]
ABSTRACT
Alternative Dispute Resolution (“ADR”) simply refers to any means of
dispute resolution excluding litigation in a courtroom.  It is a form of
facilitated settlement, which is confidential and without prejudice. 
Consequently, the details of the process are not usually disclosed to the
public except where it snowballs into a court action. 

The laws governing arbitration in
Nigeria include the Arbitration and Conciliation Act (“the Act”)[2],
which is a federal law, Lagos State Arbitration Law 2009 (“the Lagos Law”) and
some other states’ arbitration laws. This paper seeks to examinethe procedural stages in arbitration,one of
the most common ADR mechanisms, and the reasons which
make arbitration a better alternative to litigation. 
I        INTRODUCTION
Arbitration
provides a forum for participants to present arguments and evidence in support
of their case, to a third party neutral who makes a binding decision called an
award. It is a process controlled by a single arbitrator or a panel of
arbitrators appointed by the parties.
Any
of the parties to a contract may adopt arbitration where an arbitration clause
is contained in the agreement, and a dispute arises in relation to it.Where
there is noarbitration clause and the parties desire is to proceed to
arbitration, a consent to arbitration via submission agreement may be entered
by the parties.
The
expeditious disposal of cases in arbitration stems from the less formal
procedure adopted in arbitral proceedings.The procedure for initiating and
conducting arbitration are spelt out in the arbitration rules to be found in
the First Schedule to the Act. 
One
of the advantages of arbitration is that the disputants have consensually
chosen their own private “judge” called the arbitrator(s)[3].
The arbitral tribunal determines the venue of the hearings after due
consultation with the parties. Where there are three or more arbitrators,
decision is by majority. Therefore, an odd number of arbitrators is advised. 
Arbitration
commences with a notice to commence arbitration being sent by an aggrieved
party to the other party.In the course of arbitration proceedings, request for
more information, discovery of documents and visits to relevant location may be
done. However, to ensure expeditious disposal of the matter, all of these
issues would most likely be narrowed down during pre-hearing review. 
The
tribunal listens to the oral statements and questioning of the witnesses of
both parties(cross examination)as examination-in-chief may be in form of
witness statements on oath. Also, expert witnesses may be called by the parties
to render their opinions on issues in dispute.This may be pruned down during
pre-hearing review as the parties are likely to distill witness of facts and
expert witnesses.
Arbitration
proceedings are not however regulated by formal rules of evidence as stipulated
in the Evidence Act thereby resulting in less formal and flexible proceedings.
II       PROCEDURE
IN ARBITRATION
In
ensuring an expeditious process in arbitration, some basic procedures are adopted
which endears the business world to arbitration instead of litigation:
JURISDICTION
The
first step in any arbitral proceedings is to constitute the arbitral panel.This
can either be provided in the arbitration agreement or conducted in accordance
with the Act[4]. In any
case, there can be no arbitration without an arbitrator and an arbitrator must
be appointed to conduct the reference. Once the arbitrator is appointed he must
be clothed with jurisdiction.Jurisdiction is the authority to arbitrate
upon the dispute between the parties.
The arbitrator is only authorised to
exercise the jurisdiction and powers conferred on him by the parties.His
jurisdiction is derived from the agreement of the parties i.e. the issues
submitted to him for determination or from Statute. The arbitral tribunal is
competent to rule on its jurisdiction[5].
PRELIMINARY MEETINGS
The
mainpurpose of a preliminary meeting is to plan the expeditious and efficient
conduct of the arbitration. Arbitration is a broad spectrum where innovations
and variety are not only encouraged but lauded:
“…the
arbitral tribunal may, subject to this Act, conduct the arbitral proceeding in
such a manner as it considers appropriate so as to ensure a fair hearing”[6].
The
overriding procedural obligations of an arbitration tribunal in conducting a
reference include:
(i)    complying with the express mandate, if any,
laid down by the parties;
(ii)   conducting the process fairly and even-handedly;
and
(iii)  using all reasonable dispatch in entering on, proceeding
with the reference and making an award.
 
Preliminary
meeting therefore cannot be held until:
(i)    The tribunal has been appointed;
(ii)   The tribunal has been provided with the
information as to the principal issues between the parties although this can
sometimes be dealt with at the preliminary meeting;
(iii)  Administrative fees, where applicable, have
been paid; and
(iv)  The impartiality of the arbitrators have been
checked, where necessary, and the result made available to all.
It
is imperative that adequate preparations be made well ahead by the arbitrators,
the parties and their advisers before the preliminary meeting. Issues like the (i)
venue[7],
(ii) time[8],
(iii) transportation arrangements for the arbitrators and other sundry issues must
be addressed in order to have a successful meeting and most importantly, a well-drawn
up agenda.
In
advance of the preliminary meeting, the parties should also try to identify the
matters to be dealt with and, if possible, agree on the procedure and any
directions to be sought from the tribunal. If agreement is reached, this will
save time and costs at the preliminary meeting itself and may even render such
meeting unnecessary.
PRE-HEARING REVIEW
It
is preferable except in very simple cases to hold a pre-hearing review before
the hearing and after all the preliminary meetings. This helps to save time and
costs at the hearing because the pre-hearing review helps the arbitrator and
the parties clarify all outstanding issues so that by the time they go into the
hearing they can go through them on a day-to-day basis and finish in a short time.
The matters to be discussed at the pre-hearing review will vary depending on
what has transpired at the preliminary meetings (if any).
PROCEEDINGS AT TRIAL
The choice of proceedings to be adopted depends on
the facts of each case[9]. Where parties do not
choose or agree on any type of hearing, the tribunal chooses the type of
hearing[10].It is better for the parties to agree
on the type of hearing to be adopted where there is a serious dispute over
relevant facts. The proceedingat trial may take the form of:documents only where there are no oral testimonies to support
the claim;documents only with brief oral final submissions; or documents only
with only experts in attendance to give oral testimony before the arbitrators.If
“Documents Only” method is
agreed, then the “issues” need
to be framed with more precision than when any other form of proceedings is
adopted. 
Short
Procedure Hearing:
This
is only suitable for “quality”
dispute requiring some summary decision,i.e,“look
and sniff” cases.  Each party usually
bears his own costs.
Full
Procedure with Hearing:
This
is for disputes that require examination
or cross-examination of witnesses of fact.  This evidence is usually partly oral and partly documentary.
The tribunal must consider whether a Scott Schedule[11]
is desirable.
It must
be noted that the procedure adopted determines the length of the hearing.
However,the
procedure adopted must not contravene the provisions of the applicable law and
procedural rules:
“…the Claimant to state the fact
supporting his Points of Claim, the points at issue and the relief or remedy
sought by him whilst the respondent is to state his Points of Defence in
respect of the particulars unless the parties have otherwise agreed on the
“required elements of the Points of Claim and Defence.[12]”
The
tribunal and parties must consider such factors as the complexity of the matter
and the nature of the dispute in ensuring that they adopt the most suitable
procedure. Disputes with little factual details may be best suited to the
Statement of Case procedure by mere exchange of correspondence; e.g. quality
disputes which are tobe determined on expert evidence only while pleadings may
be best suited to cases involving complex issues of law.
The
tribunal is to determine the time for exchange of written statements. In any
case, the law provides that the time must not exceed 45days except if
justifiable[13].
AGREED BUNDLE
In
arbitration proceedings the parties agree on an “Agreed Bundle” of documents,
which constitutes the documents to be referred to during the hearing. The arbitrator
will direct the parties to meet and agree on the bundle within a specified
time. This also helps to fast track proceedings.
RELEVANCY AND ADMISSIBILITY
The Evidence Act excludes
arbitration from its application[14].
This is not to say however that rules of evidence do not apply to arbitration.
In fact, the rules of evidence are wider than what the Evidence Act provides
and they apply to arbitration to enable the arbitrator come to a reasonable
decision on the evidence before him. It should be noted that Section 15 (3) of
the Actconfers powers on the arbitral tribunal to determine the admissibility,
relevance, materiality and weight of evidence placed before it[15].
The reason for this provision is to play down as much as possible the recurrent
technicalities that surround the rule of relevancy and admissibility under the
Evidence Act.
III     ARBITRATION
AS A BETTER ALTERNATIVE
The
numerous advantages of arbitration over litigation include a faster and cheaper
means of dispute resolution, utmost privacy of the issues between the parties[16]amongst
others. While litigation has been shown to give room for frivolous techniques, arbitral
proceedings have been sped up byadmitting written statements in place of
opening and closing speeches, admitting depositions made by
witnesses of fact and inviting such witnesses only for cross-examination. In
addition,admitting reports prepared by experts while they appear only for
cross-examination,using a Scotts Schedule.
Other ways to save time at the
hearing are:
Defining the Issues
The
arbitrator should direct, at the outset, that a list of issues be agreed and
delivered to the arbitrator a reasonable time before the hearing, and that
failing such agreement each side delivers a list of what it considers to be the
issues. The procedure for defining the issues vary according to the nature and
complexity of the dispute.
Exchanging
Proofs in advance
The
arbitrator may require that proofs of all witnesses be exchanged, and copies
delivered to the arbitrator, before the hearing.
Documents
Selected before Hearing
The arbitrator
may require that the documents to be referred to at the hearing be selectedbefore
the hearing, and this should be the responsibility of the advocate who is to
conduct the case.  The arbitrator should also
direct that:
(i)      The consolidated bundle(s)
of the documents selected should be delivered to the arbitrator by a specified
date before the hearing;
(ii)      At the hearing all the
documents so submitted shall be taken as read (because he will in fact have
read them); and
(iii)      At an appropriate stage
the arbitrator will specifically consider the question whether a substantial
number of irrelevant documents has been selected, and if so whether a special
order should be made in respect of the additional costs thereby occasioned.
The
frontloading system and the case management conference in the rules of court[17]
can be likened to the preliminary meetings, pre-hearing sessions, defining
issues and exchanging proofs and written statements obtainable in arbitration
proceedings. The introduction of these similar concepts in the rules of court
and a fast track division is to ensure efficient and speedy dispensation of
justice but the bureaucracy in the system has prevented the system from making
any remarkable achievements. Even the motion for summary judgment in the rules
which shouldn’t take more than 2weeks to hear and determine usually suffers the
same fate as the cases on the general cause list.
It
is the duty of the arbitral tribunal to adopt
procedures suitable to the circumstances and to avoid unnecessary delay and
expenses. The parties must also cooperate by doing all things necessary
for the proper and expeditious conduct of the proceedings as cost may be
awarded against any party that foists any sort of delay tactics in the course
of the proceedings.
IV CONCLUSION
The
proceduresin arbitration sessions examined above have proved effective and
efficient in the expeditious disposal of arbitral cases, thereby endearing the business
community and the public in general to the choice of arbitration over
litigation. The adoption of arbitration either by an arbitration clause or
submission agreement has become more popular as people are coming to terms with
the fact that arbitration constitutes a better alternative. It is also an
amicable method of dispute resolution enabling the parties to maintain their
business relationships.

[1]Tanimola Anjorin
holds a bachelor’s degree in History and International Studies from Lagos State
University. He thereafter obtained a Bachelor of Laws degree from Lagos State
University and was called to the Nigerian Bar. He is also an Associate of the
Chartered Institute of Arbitrators (UK) Nigeria Branch.
[2]1988 Cap. A18 LFN 2004.
[3]Where the parties to an arbitration
agreement do not provide for the number of arbitrators to be appointed, section
7 of the Act provides that the number of arbitrators shall be deemed to be
three.
[4]Section 6 of the Act provides for
the number of arbitrators to be appointed in the event that the arbitration
agreement is silent on this issue while Article 6 – 8 of the Arbitration Rules
in the First Schedule gives a detailed procedure to be adopted in the
appointment process.

[5]This is laid down in the popular case ofCOMPETENZ v COMPETENZ. See also section
12 of theAct and Article 21 of the Arbitration Rules in the First Schedule to
the Act.

[6]Section 15(2)of the Act.
[7]Section 16 of the Act.
[8] 
Section 17 of the Act.
[9]  Section 20(1) of the Act
[10]See Article 15 of the Arbitration
Rules in the First Schedule to the Act.
[11]In arbitration sessions, parties
bring numerous claims and issues which make the arbitral proceedings appear
like litigation. In order to avoid this, the tribunal may resort to the use of
the Scott schedule. The Scott schedule is essentially a table with inputs from
both the claimant and respondent. The claimant sets out hisargument first, and
then the schedule is passed to the respondent to set out his responses. The
main objective of the Scott schedule is for the issues in disputes to be
presented as clearly as possible, thus saving time, reducing cost and
conserving efforts.
[12]  Section19 the Act.
[13]See Article 23 of the Arbitration
rules in the First schedule of the Act.
[14]  Section 256(1)(a) of the Evidence Act 2011.
[15]See also Article 25(6) of the
Arbitration Rules in the First Schedule of the Act.
[16]Article 25 (4) of the Arbitration
rules provides: “Hearing shall be held in
camera unless the parties agree otherwise”.
[17]Order 3, 5 and 25 of the High Court
of Lagos State (Civil Procedure) Rules 2012.

Photo Credit – www.newtonarbitration.com