Why Start-ups need to hire a lawyer or fail | Damilola Oyebayo and Dayo Dauda

Why Start-ups need to hire a lawyer or fail | Damilola Oyebayo and Dayo Dauda

The Nigerian start-up
ecosystem has evolved in the past few years, many startups have emerged, some
have won while some have lost, regardless of the industry or the nature of the
product or services being offered by a start-up, there are some common success
factors shared by companies that have grown in the past few years. For
instance, issues like; traction, leadership, funding and legal structure are a
few of the differentiating factors of start-ups in Nigeria and even globally.


Often times, when we interact
with many founders, it is often discovered that product development does not
qualify as entrepreneurship, as many founders even find it hard to understand
the business aspect of the technology they have invented, thus, it is no
surprise that they usually overlook the importance of having a serious legal
backing while embarking on their entrepreneurial journey. While some do not
right this wrong until they encounter a serious legal problem like Privacy or
Intellectual property or employee or shareholders agreement, others do not even
get a second chance and this latent defect literally kills the business before
it even takes off.

Interestingly, in the new
global business ecosystem, a start-up surely does not need a lawyer for the
sake of hiring one, there is no point hiring a lawyer that hinders innovation,
start-ups should pay attention to lawyers that understand business and are
ready to add value to the company by providing business friendly legal
solutions, in essence, if your lawyer is not adding any real value to the
business objectives of your start-up, definitely, there is no point engaging
such lawyer any further.

At the recently concluded
Paystack event tagged “Y Combinator Lagos meet up”, held at the Paystack
Headquarters, we had the opportunity to talk to some Tech Founders and ask them
about the role a lawyer plays in ensuring the growth and success of start-ups.
They could not over-emphasize the importance of Lawyers and from our
interaction with them, we observed that the type of value a lawyer provides,
usually depends on the growth stage of the start-up, at the early stage, the
lawyer is involved in the following;

Incorporating the start-up 
this requires drafting and filing the incorporation documents at the Corporate
Affairs Commission. This is very paramount given how the lawyer would from the
information provided by the founder/promoter of the startup and the needs of
the startup advise on the best type of company to register and to also (where
necessary) obtain all relevant permits and licenses. More importantly, the
lawyer would advise on the best time to register the startup in line with the
provisions of the Companies and Allied Matters Act, 2004 which expressly
provides for the timeline for commencing business whether before or after incorporation
(depending on the nature of business)

Product development
One would find this rather shocking, after all, the lawyer is not expected to
be a technical developer of the product. However, the unique nature of
start-ups always require interaction with users, thus, startups need documents
like Terms and Conditions, Privacy Policy, etc. to regulate the manner of using
the products by customers. These documents are like the undertakings of the
start-up to the customers and vice-versa, of course, it is drafted according to
the business model of the start-up. Therefore, the lawyer handles this in order
to ensure compliance with all relevant domestic and international laws
Creating the legal and
ownership framework- there are certain must haves for start-ups at the early
days, to begin with, a lawyer can help determine the structure and ownership of
the company, this will eventually influence the drafting of Co-founders
agreement (where they are more than one) and deciding stock options among
co-founders (this information must be included in the incorporation documents)
and Employees Stock Options (ESOP)

Determining and protecting
Intellectual Property created by start-ups
– expectedly,
start-ups will create a number of Intellectual Property Rights (IPRs) like
Patents, Trademarks, Designs, Copyrights, Trade Secrets, Domain names, etc. it
is the responsibility of the lawyer to protect all these IPRs by registering
same at the Trademark, Patent and Design Registry and ensure the ownership of
these rights by the start-up by drafting documents like IP Assignment
Agreements, Employment Contracts, External Vendor (Consultant) Agreements,
Product Development Agreements etc.

Raising Funds
this is by far the most important need of a start-up, and although, it is a non-legal
role, however, in the global start-up ecosystem, lawyers have been the nexus
between founders and investors and they have consistently helped founders raise
funds. Lawyers facilitate interactions that eventually lead to funding between
founders and investors/venture capitalists, mentors and accountants.

A seasoned start-up lawyer
can handle these responsibilities in order to promote the business objectives
of the start-up at the early stage. At the scaling stage, the lawyer plays a
host of different roles like sitting on the board to advise, company
secretarial functions, advisory services during mergers and acquisitions, these
and many more will be discussed in the subsequent series of this publication.

Damilola
Oyebayo
and Dayo Dauda

Management Consulting and ICT Law Enthusiast

Source: Linkedin 

The Benefits Of Mediation Over Litigation (iii)| DmediationLawyerist

The Benefits Of Mediation Over Litigation (iii)| DmediationLawyerist

It is usually less expensive than
litigation which goes all the way to judgment.
Mediation provides litigants with a wider
range of solutions than those that are available in litigation; for example, an
apology; an explanation; the continuation of an existing professional or
business relationship perhaps on new terms.
 

It can create an agreement by one party to
do something without any existing legal obligation to do so.
It is desirable to be able to control the
outcome of the dispute rather than have it imposed upon you, potentially
leaving both parties dissatisfied by the experience.
The absence of a trial not necessarily
wanted by both parties has its advantages; reduced costs, no full trial preparation,
the litigation is not so protracted and the absence of findings of fact that
might subsequently be used by one of the parties.
Generally, there is a very speedy
resolution.
Those interests which are of real
importance to either or both parties will not be obscured by technical or legal
issues advanced by the lawyers within the framework of the litigation.
There may be no real point in trying to
fight a legal principle where the determinative legal issues are already well
settled.
One or both parties may have good reasons
to avoid the publicity which potentially at least is always thrown up by
litigation whether at a local or even national level.
Footnotes:* Standing Conference Of
Mediation Advocates (SCMA) *The Lagos Multi- Door Courthouse Law (LMDC) 2007*
The LMDC Practice Direction on Mediation Procedure* The Multi Door Courthouse
Code of Ethics for Mediators* Guidelines For Enforcement Procedure *Guidelines
for Court referrals to Alternative Dispute Resolution *Principles of
Alternative Dispute Resolution by Stephen J.Ware *Effective Mediation Advocacy
by Andrew Goodman.*
For more information –
Follow
us on Facebook Page: fb.me/dmediationlawyeristng
Instagram:
http://www.instagram.com/DmediationLawyerist

Nigerian Startup Registration in 2017: a Necessity or Luxury? |  Adejorin D. Abiona

Nigerian Startup Registration in 2017: a Necessity or Luxury? | Adejorin D. Abiona

When starting a business, one of the major considerations on the minds of
the owners/ promoters is whether or not registration is needed at that material
time. This of course may be borne of the desire to justify every expense to be
incurred by a newly formed startup i.e. every penny has to provide a return on
the investment. Registration of a startup may seem unnecessary at the beginning
stage of a business to the owner but this should not be the case. This article
will look into registration of startups in Nigeria with focus on the major
reasons for registration and drawing a conclusion on whether registration is a
necessity or not.

Business structures
The legal structure chosen for a business has major implications. In
choosing a structure for a business, factors such as the potential risks and
liabilities of the business, the objects of the business, the costs involved in
establishing and maintaining the business structure and tax implications should
be taken into consideration. The promoters/owners of a business must decide on
the legal structure that best meets their needs, as this will determine the
type of registration procedures that will be followed.
There are three commons ways to structure a startup in Nigeria:
Sole trader: This consists of an individual trading on his own. He controls and
manages the business. It is the simplest business structure and easy to set up
with minimal costs. A sole trader is solely responsible for the liabilities of
the business and also solely enjoys the profits. The main disadvantage of this
structure is that there is no protection for the personal assets of the
Proprietor in the event that the business fails as his assets become available
to pay off creditors.
Partnership: This involves an agreement between two or more
people to go into business together. Each of the partners will be jointly and
severally liable for the debt of the partnership. It is not necessary for all
the partners to be fully involved in the management of the business but they
all share the profits or loss as the case may be.
Limited Liability
Company
: This is a
legal entity separate from its shareholders, directors and employees. Liability
here is limited to the amount invested in the company as shares. Hence, the
shareholders enjoy a form of protection on their personal assets in the event
that the company goes into liquidation.
The body generally responsible for registration of businesses in Nigeria
is the Corporate Affairs Commission (CAC)
[1].
Why register a startup?
Compliance with the
law
The Law makes it mandatory for every individual, firm or corporation
operating under a business name to register their business within 28 days of
commencement[2]. Also a limited
liability company can only be formed in the manner set out by the law[3]. Hence, in order to comply with
the provisions of the Law, a startup must be registered. 
The law that primarily provides for registration of business
organizations in Nigeria is the Companies and Allied Matters Act (CAMA) 1990[4].
Brand reputation
and public perception
Building a reputation with new clients and customers may seem very
difficult. Registration enhances the public perception of a startup and gives
potential clients the confidence that they are dealing with a reputable
business. Also, there are many businesses who will not engage with an
unregistered startup because of their status and reputation. 
Registration gives the assurance that the business is legitimate and
reputable.
Bank Account
To open a business bank account for a startup, proof of registration is
always a necessary requirement. Banks will not open a business account for an
unregistered startup. Having a business account gives a startup more
credibility and trust from the customers, bank, other associated businesses and
the public. The account also ensures that business funds are not diverted for
personal use.
Loan Facilities
Most Financial Institutions give business loans only to registered
businesses. The Institutions in order to protect their interest and to ensure
repayment of loan facilities would naturally need an assurance that a business
is legitimate and the facilities would be put into proper use. This assurance
is easily seen in a registered startup and this is why registration is a
non-negotiable requirement to qualify for such loans.
Brand identity
Protection
Registration gives a unique identity to a startup and such is also
protected under the law. By the provision of law, no two businesses should have
the same name or names so identical as to confuse the public. Once a business
name is registered, such name is recorded and recognized by the government and
as such, no other business can register with that same name.
A registered business name enjoys the advantage of protection against
competitive usage within the country.
Liability
Protection
When a startup is registered as a limited liability company, the business
becomes a different entity for its owners. The owners can not be personally
held liable for the debt of the company. This means that no one can legally go
after the personal properties of the business owners in case the business goes
into liquidation or to enforce any claim against the Company.
Registration as a limited liability company protects the personal assets
of the business owners.
Continuity
A registered startup has the ability to live longer than its owners. This
means that even if the business owners become incapacitated or dead, the
business will not close down especially when a proper structure is in place.
A registered startup is an asset transferrable to the next generations.
How to register a Startup
Registration of a startup in Nigeria involves some processes including
filling of forms and filing of some documents. It is advisable to engage the
services of persons with experience in this field who can streamline the
process and get the business registered within a very short period of time.
Conclusion
Registration of a startup may seem to be an investment without direct
return but similar to insurance. It will definitely cost money, time and
effort. However, this is a necessary price to pay for the protection of the
business, business owners and associated businesses. It is always advisable to
register a startup in order to enjoy the benefits stated above which are indeed
necessary for the smooth running and the image of the startup. Hence, it is not
a luxury to register a startup but a necessity.
[1] Section 1,
Companies and Allied Matters Act (CAMA) 1990, CAP C20, LFN 2004
[2] Section 574,
Companies and Allied Matters Act (CAMA) 1990, CAP C20, LFN 2004.
 (Exceptions to this provision is contained in Section 573 CAMA)
[3] Section 35,
Companies and Allied Matters Act (CAMA) 1990, CAP C20, LFN 2004.
[4] CAP C20, LFN
2004.
Adejorin D. Abiona
Associate Attorney | Writer | Public Speaker
Ed’s Note – Article was first
published here
Photo Credit – https://www.etaxcorporate.com

Why we need competition laws in Nigeria

Why we need competition laws in Nigeria


According to the Black’s
Law Dictionary, 8th edition, Competition is the struggle for
commercial advantage; the effort or action of two or more commercial interests
to obtain the same business from third parties. Whish and Bailey describe
Competition as a struggle or contention for superiority, and in the commercial
world this means a striving for the custom and business of the people in the market
place[i]

In the Nigerian telecommunication
industry for instance, the major players include MTN, GLOBACOM, ETISALAT and
AIRTEL. These aforementioned companies are competitors in the Nigerian telecom
industry. Competition law in regard to these companies will seek to regulate
the actions of these companies in their bid to gain market power and win
consumers over. 
Competition law consist of
rules that are intended to protect the process of competition in order to maximize
consumer welfare.  In other words, competition
law can be described as consisting of rules and regulations which oversee the
conduct in which companies carry on business (Whish, Bailey 2012). 
The major aim of
competition law is to ensure a deep supply market for consumer goods and
services, not just to ensure that there are many suppliers in the market for
particular goods and services, but to ensure that such suppliers play according
to a set of rules that would make it difficult for any of them, individually or
as a group, to lessen or eliminate competition in the market[ii].
In Nigeria, there is no
form of competition law in existence and this may make the concept strange to
many readers, others may wonder why competition is relevant in the first place.
In answering that question, please note that fair competition allows for open,
equitable, and just competition between business competitors. Unfair
competition on the other hand can lead to – 
·       
Companies
forming cartels and colluding to decide market pricing and production,
 ·       
Anti-competitive
agreements, for instance, if all telecom agencies in Nigeria came together and
jointly decided to offer their services for a certain price range thereby
forcing the consumers to buy them.
 ·       
Abuse
of dominant position, whereby a company uses its position as the dominant
operator in the industry to force prices on consumers, for instance, recently consumers
brought before the Consumer Protection Council, a case against Pay-Tv provider,
DSTV, demanding that the council compels it to review its charges downwards[iii].
The CPC does not have such authority and this may allow DSTV increase its tariffs
excessively knowing Nigerians will have to pay because there is no other Pay-Tv
service provider competing with DSTV.
 ·       
Monopolization
by an enterprise, and
 ·       
Anti-competitive
mergers, for instance if MTN, GLOBACOM, AIRTEL and ETISALAT were to announce a
merger, such action will be remove all form of competition in the telecom
industry.
There is currently no law
in the country solely dedicated to competition, even though it exists in some
Acts, such as the Nigeria Communications Act. Although there exists a Price
Control Act, this only serves to protect consumers of stable and essential
items, like sugar, salt, milk, flour, matches, petroleum products, motor
vehicles, motorcycles and bicycles’ with their spare parts (“Controlled
Commodities”). The Price Control Act empowers the Price Control Board to fix
the Controlled Price range for these essential items and makes it a criminal
offence for any person to sell any of the listed Controlled Commodities above
their approved controlled price[iv].
The National Assembly has
been called upon severally to pass a Competition Law in Nigeria, but all
efforts have proved abortive. Currently, there are several proposals for the
Bill before the National Assembly and it is hoped that the 8th
National Assembly will heed this national call and pass a law prohibiting
anti-competition actions by companies. 
At a time when Nigeria is
currently undergoing a recession and earning power is diminishing among the
vast populace, unscrupulous companies can find it ideal to collude and jointly
levy on the Nigerian people, a price regime bothering on exploitative.
Adedunmade Onibokun, Esq.
 Adedunmade is the Principal Partner of
Adedunmade Onibokun & Co., a corporate commercial law firm located in
Lagos, Nigeria. He can be reached via
dunmadeo@yahoo.com


[i]R.
Whish and D. Bailey (2012). Competition Law . 7th ed. London : Oxford .
3.
[ii] TEMILOLUWA
OSINOWO LL.B (HONS), B.L. (2014). COMPETITION LAW IN NIGERIA. Available:
http://www.vitaveritasllp.com/competition-law-in-nigeria/. Last accessed 2nd
December, 2016.
[iii] Leadership
Editors. (2016). Need For Competition Law In Nigeria. Available:
http://leadership.ng/opinions/editorial/508611/need-competition-law-nigeria.
Last accessed 2nd December, 2016.
Photo Credit – Gov.uk 
The Enforceability of Non-Compete Clauses/Agreements under Nigerian Labour Law

The Enforceability of Non-Compete Clauses/Agreements under Nigerian Labour Law


Entrepreneurs often dread losing key staff. The difficulty
involved in having to recruit and successfully integrate new faces into an
existing order makes the endeavour an unsavoury undertaking to many. However,
if losing a key staff is worrisome enough, the realization that a disgruntled one
may walk out the door with more than his termination letter and severance
paycheck, is a much graver cause for concern.

Daily, employers are faced with
the unfortunate reality that a departing employee may leave to go work with a
competitor, poach their long term clients or utilize skills, confidential
information and trade secrets acquired during the subsistence of their
employment to secure new jobs. This apprehension has prompted many an employer
to have prospective employees sign non-compete agreements as a prerequisite for
working for them.
A non-compete agreement also referred to as
“covenant not to compete” or a “contract in restraint of trade” is an agreement
wherein an employee consents not to engage in a similar occupation or disseminate
trade secrets that is likely to occasion damage or compete against the business
of his employer. It is a commercial contrivance which seeks to preclude
insiders from taking trade secrets, business affiliations or clientele to other
corporations or employers when they leave. 
A non-compete agreement may either
be a major clause in an employment agreement or a separate agreement, the
execution of which is a condition precedent to employment. Which form it takes,
the same effect is had. The agreement generally restricts an employee from
entering into a similar engagement for a specific period of time or within a
certain geographical location. This restriction is usually dual-pronged. One
operates during the subsistence of employment. The other transcends employment
and continues to operate after its determination. An effective non-compete
agreement seeks to achieve the following:
  • Prohibit a
    former employer employee from working with a competitor
  • Prohibit a
    former employee from soliciting former co-workers to be employee in his or her
    new company
  •  Prohibit a
    former employee from soliciting or disclosing confidential information such as
    customer lists, price lists, market strategies or other proprietary information
Generally, for a non-compete agreement to be considered
valid, it must have the following elements amongst others:
  • Be supported
    by consideration
  • Be reasonable
    in scope of the duration and geographic boundaries
  •  Protect a
    legitimate business interest
In spite of the presence of the above essentials in
a standard non-compete agreement however, the real test of validity is whether the
agreement is in itself enforceable or not. This is because having an employee
append his signature to a non-compete agreement and being subsequently able to
enforce it are two different things entirely. While it is a trite principle of
law that the court will not hesitate to enforce the terms of a mutually
consensual contract and parties will be precluded from refuting their claims
and liabilities under such, a non-compete clause which prime facie appears meticulously crafted may be unable to withstand
the objective scrutiny of the court. 
Therefore, as tempting as it is for an employer
to draft an expansive, seemingly iron clad agreement, concerted regard should
be had to the likelihood of the agreement’s chances at withstanding the test of
validity and enforceability. Generally, the courts frown at restraint of trade
and are exceedingly wary of clauses that restrict an employee’s chances to
future employment. This modern law principle against restraint of trade was
laid down in the locus classicus Nordenfelt v Maxim Nordenfelt (1894) A.C 535; (1891 – 4) ALL ER
Re. 1.111)
where the court held that all clauses in restraint of trade
are contrary to public policy and as such, void ab initio save only there
are special circumstances which justify them. 
Nevertheless, the right of an
employer to the protection of his confidential trade secrets and business is fairly
recognized. Hence, the court may be inclined to enforce the agreement if
evidence is sufficiently led to show that it is reasonable in scope, nature and
extent and regard is had to the interest of the parties and the general public.
In Koumoulis
v A.G. Leventis Motors Ltd (1973) All N.L.R. 789
, the court observed
that:
“The covenant, the subject of the complaint was
reasonably necessary for the protection of the business interest of the
respondent and was therefore valid and enforceable in law”.
It should however be noted that an employer will
not be afforded the protection of an expansive non-compete clause to shield
himself from healthy business competition by a former employee. 
Another
determinant factor of enforceability of non-compete agreements is its
geographical scope. Where the contemplation of the agreement is an expanse of
area too wide to be adjudged reasonable, the court will refuse to enforce it,
with the consent of the employee notwithstanding. This principle is notably
consistent in all jurisdictions and was sufficiently highlighted in the
decision of the court in John Holt & Co (Liverpool) Ltd v
Chalmers (1918) 3 NLR 77
While a court may alter an unreasonable term or
terms of a non-compete agreement, it also reserves the power to
invalidate the agreement in totality if
it is reasonably satisfied that the employer intentionally included overly
broad language that renders it unreasonable and oppressive. In Mesop
Kholopikiaan v Metal Furniture Nigeria Ltd {(unreported) HCL, Ikeja Judicial
Division, Suit No IK/180/69 delivered on 5th March 1974)}
, a
non compete clause which covered a radius of 800 miles from Ikeja, Lagos where
the defendant was based was held unreasonable and therefore void for it does
not only span the whole of Nigeria but extends into some neighboring west
African states.
As an additional test of enforceability, the
court may take into account the nature of the information had and the knowledge
acquired by the employee. N.M Selwyn, the renowned author on labour law texts
is of the opinion that a distinction should be drawn between subjective and
objective knowledge. According to him, objective knowledge comprises trade
secrets, list of customers etc, all which comprise the employer’s property and
therefore merits protection from infringement. Subjective knowledge on the hand
entails the general knowledge of the trade and industry and organizational
ability acquired by the employee during the subsistence of his employment, the
restraint of which would be unfair. In Herbert Moris Ltd v Saxelby (1916) 1 AC 688),
a 7 year non compete clause precluding an engineer from taking up employment
with an competitor after the determination of his employment was voided on the
ground that it was a restraint on his technical skill and knowledge which was
acquired by virtue of his industry, observation and intelligence.
Duration may also play a significant role in the
determination of enforceability. A non-compete clause which is couched to
restrict trade for a lengthy period may, if considered alongside other relevant
circumstances, be adjudged an unreasonable cloak against competition. In M
& S Drapers V Reynold (1956) 3 All ER 814
, a restraint on a
collector’s saleman of a drapery firm not to solicit his employer’s clients for
five years was voided on the ground that the restraint was too long in view of his
humble position in the company. Similarly, in Esso Petroleum Ltd v Harper’s
Garage (Stourport) Ltd (1967) UKHL 1
, the court voided a twenty year
restraint imposed on a petrol station owner under a solus agreement for being too unreasonably lengthy. It should
however be noted that each case ought to be treated on its merit, as the length
of the restraint is considered alongside other extenuating factors including
but not limited to the employer’s business and the position of the employee in
the company. The courts have held that a lengthy restraint on an employee’s
trade would not ordinarily be voided if it is revealed by the circumstances of
the case that that the restraint is necessary for the reasonable protection of
the employer’s proprietary interests.
CONCLUSION
Intellectual property is indubitably one of the
most invaluable assets in the intricate web that is the global business sphere,
largely because of the time and resources expended in its contrivance. Hence
the need to safeguard proprietary interest in trade secrets and confidential
information from abuse by insiders becomes even more apparent by the day. This is
why it is almost impossible to see a contemporary contract of employment devoid
of a non-compete or confidentiality clause. Fortunately, a non-compete
agreement, if painstakingly drafted, can obviate the dangers which it seeks to
circumvent. However, a small oversight can effectively vitiate a part or the entirety
of the agreement to the detriment of the employer and the benefit of the
employee and vice versa. Thus, it is suggested that when drafting a non-compete
agreement, strict regard should be had to its scope, duration and enforceability.
The agreement should be tailored to match the business and employee in
contemplation and caution should be exercised in the reckless use of templates
that are lifted verbatim from the internet. Better still, it would be prudent
of an employer to outsource the drafting of non-compete agreements to a
competent attorney who is adequately versed in the art of corporate commercial
legal drafting and handling contractual matters to ensure that the agreement is
apposite, reasonable and fair.
LIST
OF AUTHORITIES
·       
Esso Petroleum
Ltd v Harper’s Garage (Stourport) Ltd (1967) UKHL 1 John Holt & Co
(Liverpool) Ltd v Chalmers (1918) 3 NLR 77
·       
Fitch v. Dewes
(1921) 2 AC 158
·       
Herber Moris
Ltd v. Saxelby (1916) 1 AC 688.
·       
International
Journal of Advanced Legal Studies and Governance, Vol 4, No 2, August 2013
·       
John Holt
& Co (Liverpool) Ltd v Chalmers (1918) 3 NLR 77
·       
Koumoulis v
A.G. Leventis Motors Ltd (1973) All N.L.R. 789,
·       
M & S
Drapers V Reynold (1956) 3 All ER 814
·       
Mesop
Kholopikiaan v Metal Furniture Nigeria Ltd {(unreported) HCL, Ikeja Judicial
Division, Suit No IK/180/69 delivered on 5th March 1974)},
·       
N.M. Selwyn,
Law of Employment 3rd ed. (London, Butterworths, 1980) Pp. 282-3
·       
Nodenfelt v
Maxim Nordenfelt (1894) A.C 535; (1891 – 4) ALL ER Re. 1.111)
·       
The Validity
of the Doctrine of Restraint of Trade under the Nigerian Labour Law – Uko, E.J.
     
     Temitayo Ogunmokun Esq. 
    

Temitayo
Ogunmokun is legal practitioner based in Lagos, Nigeria. His areas of practice
include corporate commercial law, energy, taxation and international adoptions.
He presently works at a commercial law firm in Victoria Island, Lagos. He is a
volunteer legal adviser for the Literacy Integration and Formal Education (LIFE),
an NGO specialized in international adoptions and a published fictional writer
and poet. 

Photo Credit – www.quora.com 

Compliance Under The Corporate Immigration Regime in Nigeria

Compliance Under The Corporate Immigration Regime in Nigeria



Under the Nigerian corporate immigration regime, foreign
nationals may undertake any type of business and own 100 percent equity and
undertake any type of business in Nigeria except those in the negative list,
that is, production of arms, narcotics and related substances which are
prohibited to Nigerians and Foreign Investors alike.[1]

Only exempted foreign companies may carry on business in
Nigeria without incorporating a local entity. The application for exemption is
made to the office of the Secretary to the Federal Government.[2]
Relevant Permits –
Foreign
businesses hoping to carry out business in Nigeria must incorporate a local
entity in Nigeria with a minimum share capital of ten million naira (N10,000,000.00).
The company is required to have at least 2 shareholders (they may be
corporations or individuals) and 2 directors. 
Once
the company has been incorporated and obtained the Certificate of Incorporation,
issued by the Corporate Affairs Commission (“CAC”),
the company can then apply to the Federal Ministry of Interior (“the Ministry”) for a business permit,
which licenses the entity to carry on business in Nigeria.
Once
the Ministry has granted the business permit, the entity is then required to
apply to the Ministry for an expatriate quota. The expatriate quota enables the
company to employ foreign nationals to positions that have been approved by the
ministry which are listed out on the expatriate quota itself. It is noteworthy
that the expatriate quota which is usually granted for a period of 2 – 3 years
(subject to the discretion of the ministry), clearly states that for every
expatriate position occupied by a foreign national there must be at least 2
Nigerian nationals understudying the foreign national. It is always advisable to commence renewal
of the expatriate quota at least 4 months before the expiry date
.
Relevant Visas
·       
Prospective
foreign nationals who have been employed on long term basis by companies duly
incorporated in Nigeria, usually arrive the company on a Subject to
Regularization (“STR Visa”) (the
application for the visa is usually made by the company in Nigeria to the Nigerian
Mission abroad).
Once in Nigeria the foreign national is expected to
regularize the visa within 90 days by making an application to the Nigerian
Immigration Service (“NIS”), this
process is called Regularization of Stay (“ROS”).
At the end of the of the regularization period the NIS issues the Combined
Expatriate Resident Permit and Aliens Card (CERPAC)
to the foreign national.
·       
Temporary Work
Permits (“TWP”): companies desirous
of bringing foreign individuals into Nigeria on short term basis can do so by
applying for a TWP visa. This is visa usually granted to companies desirous of
bringing foreign nationals into Nigeria for the purpose after sales installation
of machinery, maintenance services etc. The application is first made by
applying to the NIS, who issues a cablegram before the Nigerian Mission abroad
issues the visa.
·       Business Visa:
This class of visa is granted to foreign nationals entering Nigeria for the
purpose attending meetings and conferences. Visitors on this visa are expressly
prohibited from taking up any form of employment in Nigeria.
·     Under the E-pass
regime, visitors in Nigeria who are likely to overstay the duration of their
visa can apply for an extension in-country.
Local Content Laws
In
certain sectors of the Nigerian economy there are local content laws which all
companies must adhere to. The provisions of these laws range from giving
priority to Nigerian firms to encouraging locally made wares. These laws apply
mostly to the Oil and Gas as wells as the power sector.
Monthly Expatriate Quota Returns
Every
company carrying on business in Nigeria with foreign nationals in its
employment is required to file to the NIS a monthly returns of expatriate quota
positions occupied and provide such details in these returns as may be
requested by the NIS. It is noteworthy to state that the quota returns is often
used by the Internal Revenue bodies as a means of reconciling the number of
expatriate employees employed by a company over a period of time for tax
computation purposes.

Busayo Adedeji

Busayo advises clients on
corporate immigration issues, advising clients on employment and labour law
issues, ensuring that clients are in line with regulatory compliance rules,
civil litigation etc

Twitter:
@thestreetloya



[1]
Sections 17 and 31 of the Nigerian Investment and Promotion Commission Act.
[2]
Section 56 Companies and Allied Matters Act.
Sun International’s Pullout ,The Nigeria Gaming Industry And The Rest Of The Economy –

Sun International’s Pullout ,The Nigeria Gaming Industry And The Rest Of The Economy –


On the 25TH of
August of 2106 we woke up to splashing headlines by several local papers
announcing Sun International’s (SI) pullout from Nigeria. Some noted that it
was the 4th South African company to pullout from the Nigerian market citing
the hostile economic environment as the reason. As expected I was inundated
with inquires from several quarters especially from those eying the Nigeria
gaming market

 – they were eager to know whether the announcement signaled
a negative outlook on the industry’s prospects. The report was bound to raise
concerns internationally given Sun internationals revered position in both the
gaming and hospitality sector. Truthfully the pullout had nothing to do with
the gaming industry, SI runs one casino in the whole of Nigeria; it is
pertinent to mention that casinos occupy the lowest rung in Nigeria’s budding
gaming industry.

While the reasons
for the pullout were widely reported, SI gave several reasons necessitating the
pullout, …. “The Federal Palace Hotel continues to operate in a difficult
environment with the Nigerian economy facing a number of crises including the
low oil price, Boko Haram and a weakening naira and it has still not recovered
from the significant impact that the Ebola epidemic had on the business’
.
While Nigeria’s
infrastructural challenges are not new, some of the reasons proffered may sound
reasonable on the face of it but on close inspection are far from compelling;
sensationalising the pullout as part of a South African exodus without any form
of juxtaposition with relevant data portends unjustifiable harm to Nigeria
which desperately requires foreign direct investments to shore up its reserves
as well as jumpstart its economy , my conclusion is that some of our journalist
in a bid to reinforce the current disenchantment with government’s perceived
failure in managing the economy inadvertently acted as economic saboteurs . 
So lets take the
issues one by one.  
While it is
official that Nigeria is in recession, several South African companies are
thriving depending on the industry and several more are investing in our
economy inspite of the perceived hostile economy. As at today there are well
over 100 South Africa companies operating in Nigeria and only a handful are
commercial failures. The list of well-known failures includes Telkom,
Woolworths and Tiger Brands. But they aren’t representative of the wider
experiences of South African companies.
It is in the
nature of doing business that some companies succeed and others fail. There are
many reasons why some have not done as well in Nigeria. These include not
conducting proper due diligence before entering the market, selecting the wrong
acquisition target, inappropriate market strategies, choosing the wrong partner
and mismanaging stakeholder relations or outright competition. For example
Woolworths was competing in the same space with Chinese imported textiles and
it wouldn’t have taken a genius to know that they were bound to fail miserably. 
Ebola for one lasted
only 90 days, in one of Nigeria’s daring showcase of effective governance
,ebola was eradicated with a casualty figure of only 7 people. So that alone
couldn’t have been a big factor in the poor room occupancy rate for the hotel
group,even 2 years after Nigeria was declared free of the disease . For one
Federal Palace Hotel (FHP) had out priced its self from the market; Furthermore
intense competition from guesthouses, boutique hotels, bread and breakfasts and
the incursion of market disrupters like air bnb left the group vulnerable and
unattractive.
Another reason
given for the pull out was the menace of Boko Haram (BH). This leaves one
wandering how that directly affected FHP given that there was never a BH attack
in Lagos or any part of the Southern Nigeria, BH attacks have largely remained
in the north eastern region of Nigeria  with some isolated attacks in Kano
and Kaduna and this attacks ceased since the new government came into power
early last year. 
Another reason
given elsewhere was the continued retention of the passports of some of SI
staff who are under investigation by EFCC; while I am not privy to the facts
prompting the investigation it is not news that several foreigners operate
locally as if they are above the laws of their host cities (the MTN matter
readily comes to mind) – in a recent chat with a senior management staff of SI,
he readily confessed that multinationals were prone to abusing the laws of
their host countries and SI was not exempted . 
So while
Nigeria’s tough operating environment includes deficient infrastructure,
erratic power supply, foreign exchange shortages, high inflation, currency
volatility, corruption, high capital cost, red tape, high rentals, as
well as excessive and unpredictable regulations we still have lots of South
African companies like MTN, Multi choice still doing good business in Nigeria. 
So what could
have prompted this level of sensationalism? My hunch is that SI needed the
media stunts in order to cover for its inability to turn profits for its
shareholders. It is not a new trick, last year me and a few other Nigerians
were aghast when we stumbled on a report by a listed South Africa company who
blamed the whole group’s misfortune on it’s $700,000 investment in a loss
making company in Nigeria in which were all shareholders in and thus familiar
with the facts. 
Because of our
poor investigative reporting culture, our media houses failed to balance out
the fact that SI ‘s pullout is part of its overall strategy for Africa – it has
all along been divesting from Africa with a focus on Latin America. In 2015
alone it divested by selling majority stake to in the Gaborone Sun in Botswana,
the Kalahari Sands in Namibia, the Lesotho Sun and Maseru Sun as well as the
Royal Swazi and Ezulwini Sun in Swaziland to MNG group. Sun International also
reduced its 100 percent stake in the Royal Livingstone and Zambezi Sun in
Zambia to 50 percent, with MHG holding the balance.
The latest
announcement by SI has more to do with its focus on Latin America arising from
its general depressed growth from the African continent than Nigeria’s hostile
economic environment. Graeme Stephens,the group CEO said
“In South
Africa, the economic environment remains a serious concern. We do not
anticipate any meaningful growth in gaming revenue until there is a recovery in
the economy and renewed consumer confidence,” .

Yahaya
Maikori

Solicitor,
Gaming and Gaminfication Consultant, Enterpreneur & Global shaper

 Ed’s Note – this article was first published here.

Ivie Omoregie: The Importance of Contracts;Especially When Dealing with Friends

Ivie Omoregie: The Importance of Contracts;Especially When Dealing with Friends


The importance of
contracts
Over the years, in my
professional capacity, as well as in my personal life, I have seen extremely
ugly disputes erupt amongst people who would have once referred to themselves
as close friends or family; all because they attempted to do business or engage
in a project together which subsequently went pear shaped. I often tell people
even if you are going into business with your mum, make sure you sign
something setting out, in clear terms, exactly what is expected from each party
’.

The importance of formally
documenting proposed business obligations cannot be over stated. Some people
believe it might be insulting to the other party if seemingly out of nowhere
they bring a document for that party to review and sign; but I always stress
that prevention is better than cure, and in most instances, to actually save a
friendship one has to be objective and follow due process.  If you were
doing business with a stranger, you would certainly mandate that the two of you
sign something to show each-others clear intentions…. So why should this change
because you are dealing with your “best friend”.
The Principals Behind
Legally Binding Contracts
The foundations of legally
binding contracts are premised on intention, an offer, acceptance of that offer
and valid consideration. Each party to a contract acquires rights and duties
relative to the rights and duties of the other parties.
Key elements for the
formation of a legal contract include: –
a.      Intention
– all parties must have intended to create relations by entering into the
contract;
b.     Offer
– there must be a valid, definite and clearly stated offer to do something;
c.      Acceptance
– this must be unequivocal and unconditional, and must be in accordance with
the terms of the initial offer; and
d.     Consideration
– this may be in any form accepted by both parties, aside from a monetary
consideration, it can also take the form of physical objects, promised actions,
services, absence from future actions and the list goes on.
The general position of
legal authorities is that any contract is legally binding and enforceable where
the parties to the contract, at the time of entering into the contract, had the
intention to be bound to the terms of the contract. All courts around the world
appreciate that the sole objective of a legal contract is to define the
agreement that the parties have consented to enter into, thus fixing their
rights, duties and obligations in-line with what has been clearly set out in
the contract. There is no legal body empowered to enforce the terms of a
contract which does not exist.
Capacity to Contract
In saying this, I must
stress that there are instances where a party to a contract may be deemed as
lacking the capacity to enter into the contract, thus the contract regarded as
unenforceable where some laws which relate to that nature of person are not
duly complied with.
These persons include: –
a.      An
Illiterate – this is generally a person who cannot read or write in the
language in which the contract has been executed;
b.     An
Infant – this is persons under the age of 21 (with an exception being
contracts for the sale of goods)
c.      A
Lunatic or Person of Unsound Mind – however
in these instances, a contract entered into with a lunatic at lucid intervals
is valid (here the test for determining whether someone is a lunatic is not
quite clear under Nigerian law, as we often see “many are mad but few are
raving
”)
d.     A
Drunkard – again the test for differentiating a drunkard from someone
who likes to drink often is somewhat grey, however where it can be proved that
the drunkard was sober at the time of entering into the contract then the
contract would be binding.
Parties to a contract are
bound by the terms of that contract, even in instances where the terms are more
favorable to of the parties; as long as the contract is not the result of
duress, undue influence or fraud, it is not the duty of the courts to determine
the business viability of the contract terms.
Key Clauses
I must empathize that the
contract does not have to perfectly drafted to be binding, although advise from
a professional would always be a best case scenario, in the event that this is
not possible, parties may simply google the applicable template and adapt to
suit their needs, or write out some pivotal points on a sheet of paper and
sign. 
The following are some
vital clauses I would advised to be included in every contract: –
1.       Commencement
Date – this is the date upon which the contract will be deemed as validly
existing;
2.      Parties
– here you list the names and addresses of the parties to the contract, where
any of the parties is a company, one may also include the company registration
number, and the country in which the company was registered;
3.      Recital
– this is a clause which details briefly the facts surrounding the transaction,
and may be narrative or introductory by nature. For example, in a contract for
the sale of goods it would be narrative and would tend to specifically state how
the seller came about possession of the goods;
4.      Consideration
clause – as titled, this clause details the consideration for the transaction;
5.      Receipt
clause – here the party receiving the consideration accepts receipt of same, or
where the consideration is not of a tangible nature confirms acceptance of
whatever consideration has been proposed;
6.     Capacity
– this clause confirms the party’s capacity to enter into the contract;
7.      Termination
clause – this usually details what constitutes a significant breach or several
events which could lead to termination if not rectified within a specified
period of time;
8.     Choice
of law clause – this clause details which laws will govern the contract, there
must be a rational reason for the choice of law specified, as the laws of
different jurisdictions may affect the parties differently;
9.     Alternative
dispute resolution clause – this clause creates an obligation for the parties
to submit their dispute to any of the alternative dispute resolution options.
It may also detail a course of actions both parties need to take in order to
rectify any possible discrepancies; and
10.   Signature
– parties should bear in mind the signatory requirements of a company.
Conclusion
The truth is, there are
several multi billion naira industries, which have been successfully operating
in Nigeria over several decades, established by a simple gentleman’s handshake.
Many people believe that in an attempt to be over diligent one can end up over
complicating the matter and set the foundation for distrust; akin to getting a
prenup before entering into a marriage. 
Many people, especially in
the Nigerian jurisdiction, because of the difficulties experienced or the
tedious nature of the litigation procedure, believe that most contracts are not
worth the paper they are written on. They believe that in most instances when
one or more of the parties involved purposely and disrespectfully rescinds on
their contractual obligations, little to nothing can be done to immediately
rectify the situation. The truth is the Nigerian court system is over
saturated, with final judgment often taking several years from the date of the
initial application. However, where the dispute is amongst related parties, any
mutual friend may intervene and give their objective interpretation of the
terms of the contract.

Ivie is a commercial lawyer, with experience and keen
interest in projects and transactions work within the Sub Saharan African region.
She is called to practice in England and Wales and Nigeria.
Ed’s Note – This article was originally published here

Taking steps frustrates Arbitration in Nigeria –  kayode Omosehin Esq.

Taking steps frustrates Arbitration in Nigeria – kayode Omosehin Esq.



Preliminary View
Arbitration is an old
dispute resolution mechanism. Some authors have traced its adoption to the
reign of King Solomon in the Bible. It is recorded that the dispute between the
two women over the living son was resolved by Kind Solomon in a manner consistent
with arbitral proceedings. Modern arbitration has proved useful in many
respects in commercial and industrial dispute settlement. Arbitration is partly
regulated by law (in terms of form and procedure), it is however largely based
on agreement by parties.

Arbitration agreement
simply implies that parties shall resolve any dispute arising from their
agreement by an arbitral panel and be bound by the decision from resolution.
When parties freely enter into an arbitration agreement, either of the parties
cannot resolve a dispute by resorting to a regular court. Where a party sues in
court, the other party can object to the suit and pray that the judicial
proceedings be stayed (i.e. put on hold) and urge the court to refer the
dispute to arbitration in accordance with the agreement of both parties.
However, agreement on
arbitration, like other private arrangements, may suffer failure from
unenforceability in some circumstances. Such circumstances are only called into
question when the court has to determine the defendant’s objection to the suit
or application for stay of judicial proceedings in order to enable parties
settle their dispute by arbitration in accordance with their agreement. One of
such circumstances is when the defendant “takes a step” in the judicial
proceedings rather than objecting or before objecting to the suit. In the said
circumstance, the defendant would be deemed to have taken steps and as such has
waived his right to insist on the arbitration agreement. The court would not
recognize the agreement that dispute be resolved by arbitration. What
constitutes these “steps” has however not been a subject of a settled law in
the Nigeria.
It would appear that the
decision of a court on the question of what amounts to taking steps will turn
of the peculiarities of the facts of each case. The determining factor is
whether the step taken is so clear as to amount to a total waiver or
abandonment of the right to insist on arbitration agreement. The foregoing will
ultimately turn on the following:
  • (a) the nature of the process (if any)
    filed by the defendant or any other act or conduct undertaken by the
    defendant before raising the objection on ground of arbitration agreement
    and/or applying for a stay of proceedings; and
  • (b)  the inconsistency of any
    such step taken with the application for stay of proceedings to such
    extent as to make the court to conclude that the right to apply for stay
    of proceedings ought to be deemed to have been waived.
  •  
There is an uncertainty in
the state of the law. The misfortune created by uncertainty in the state of the
law appears to have stemmed from the blanket pronouncement of Fatai-Williams
JSC in the case of Obembe v. Wemabod Estates to the effect that “A
party who makes any application whatsoever to the court, even though it be
merely for application for extension of time, takes a step in the proceedings”
A review of the line of
subsequent cases would provide insights into the misunderstanding of the facts
and decision in the Obembe’s case leading to the pronouncement made by
Fatayi-Williams CJN.
The First Step Taken
The checkered history of
the concept of taking steps before making an application for stay of
proceedings in Nigerian courts began with the case of Obi Obembe v. Wemabod
Estates Ltd. (1977) All NLR 130
. If there was any earlier Nigerian case on
the point, it was neither referred to nor considered in the Obembe case. 
In the Obembe case,
the appellant sued the respondent in the High Court of Lagos State for wrongful
termination of appointment as a consulting engineer claiming balance of fees
and reimbursable expenses for engineering work done in respect of a building
project for the respondent. The disagreement arose from their differences in
the quantity of steel recommended by the appellant for the project. The amount
claimed was based partly on the scale of fees laid down in a booklet published
by the Association of Consulting Engineers in London (Exhibit 3).
The respondent defended
the suit and did not file any motion for stay of proceedings even though clause
17 in part 11 of Exhibit 3 contained reference to arbitration in case of
dispute. In the judgment of the High Court, the appellant’s case was dismissed
on the ground that the appellant did not prove his case as he did not lead any
evidence or put in any document to support his case. However, the judge went
further to observe that even if the appellant succeeded in proving the amount
claimed, he (the judge) would have been unable to enter judgment in his favour
in view of clause 17 in part 11 of Exhibit 3.
On appeal to the Supreme
Court, it was held that the lower court was in error to have made the
observation. It is in the judgment of the Supreme Court that Fatayi-Williams
CJN made the general statement that has generated the confusion in the state of
the law regarding what constitutes steps before making application for stay of
proceedings pending arbitration. His lordship said at page 141 that:
“In order to get a stay, a
party to submission must have taken NO step in the proceedings. A party who
makes any application whatsoever to the court, even though it be merely for
application for extension of time, takes a step in the proceedings. Delivery of
a statement of defence is also a step in the proceedings.”

(Emphasis mine)
It is consoling, at least
for the purpose of permitting a distinction between the Obembe case and
other cases, that the Supreme Court itself stated the peculiarities of the Obembe’s
case
to indicate the limited usefulness that the statement of Fatayi-Williams
CJN can serve in determining what constitutes steps in a proceedings when the
court observed at page 141 that:
“No stay was asked for the
defendants/respondents after they were served with the writ of summons. On the
contrary, they accepted service of the statement of claim, filed their own
statement of defence, testified in their defence, and took part in the
proceedings.”
Other Steps Taken So Far
It is important to review
few of the cases in which the courts have had opportunity to determine what
constitute steps in a judicial proceedings to defeat the right of a defendant
to insist that the dispute in a judicial proceedings be referred to
arbitration.
1.    
K.S.U.D.B. v. Fanz Construction Ltd
(1990) 4 NWLR (Pt. 142) 1.
On the day this case came
up in Court, the defendant’s counsel applied to Court for an order of pleadings
and the Court ordered pleadings to be filed, giving plaintiff twenty-one (21)
days and defendant forty (40) days as requested by counsel. The Plaintiff filed
a statement of claim accordingly. Thereafter the defendant applied for stay of
proceedings. The application was rightly refused.
1.    
Fawehinmi Construction Co. Ltd. v. O.
A. U [1998] 6 NWLR (Pt. 553) 171.
In 1998, the Supreme Court
had a golden opportunity to lay down the rule and correct the palpable error
that may arise from the wholesale adoption of the blanket judicial statement of
Fatayi-Williams CJN in the Obembe case. The opportunity arose in Fawehinmi
Construction Co. Ltd. v. O. A. U.
But rather than overruling itself, the
Supreme Court towed the easier path of distinguishing the Obembe case
from the Fawehinmi case and held that the Obembe case has no
application to the case before it, thus, living the state of the law hazy and
susceptible to erratic interpretations of the sweeping statement of
Fatayi-Williams CJN in Obembe case.
In the Fawehinmi
case, the appellant (as plaintiff) took out a writ of summons against the
respondent (as defendant) claiming damages for breach of contract and wrongful detention
of its plants and machinery. On the same day the writ of summons was filed, the
appellant also filed a motion for mandatory injunction compelling the release
of its plants and machinery which motion was fixed for hearing on 3rd June
1987. On 25th May 1987, the respondent filed a motion for stay of proceedings
pending reference to arbitration in accordance with Clause 35 of the contract
between the parties. The motion for stay of proceedings was argued and was
later dismissed. Thereafter, the Court adjourned for hearing of the substantive
suit.
The appellant filed a
Statement of Claim and served same on the respondent. The respondent did not
file any Statement of Defence but rather it raised the issue that the suit was
not properly before the Court on ground that Section 46 of the University of
Ife Edict on pre-action notice was not complied with. The High Court overruled
the objection holding that the respondent had waived his right by taking steps
in the proceedings. The respondent’s appeal to the Court of Appeal was upheld
and the appellant’s suit was struck out by the Court of Appeal. The appellant’s
appeal to the Supreme Court was refused. 
It is noteworthy that,
though the defendant in this suit went beyond arbitration agreement by invoking
statutory provision in order to make the suit incompetent, the Supreme Court
nonetheless held that the trial court ought to have upheld the objection to the
suit on ground that the plaintiff did not comply with the arbitration clause in
their contract.
On what amounts to “taking
a step in a proceeding
”, the Supreme Court held at pages 183 – 184 as
follows:
“Now by appearing before
the trial in a court to raise preliminary issue of clause on arbitration to be
resorted to first before the trial in a court of law, could the defendant be
said to have waived its right? When parties enter into agreement and there is
an arbitration clause whereby the parties must first go for arbitration before
trial in Court it is natural for the defendant in a case where the other party
has filed a suit to ask for stay of proceedings pending arbitration. That does
not amount to submission to trial. In the case where such application is
refused the next step is to invoke a statutory right where it exists if that
right will make the suit incompetent. In the present case, s. 46(1) of the
Edict, (supra) was invoked by the defendant and the learned trial judge held it
was too late and that the defendant had waived its right. The right under
s.46(1) is very wide. Waiver is not all that simple, appearance by way of
demurrer is not enough to amount to waiver. When party has a right whether by
way of agreement or under statute he can exercise it at the earliest time and
can equally waive it if the statutory right is not absolute and mandatory. The
waiver must be clear and unambiguous like allowing all evidence to be taken or
even decision given before challenging the hearing. It will then be shown that
the party, deliberately refused to take advantage of the right when it availed
him. Such failure to take advantage of a right must be so clear that there will
be no other reasonable presumption than that the right is let go. The
preliminary skirmishes in this case at the trial Court could not by any
imagination be presumed to be a waiver. The defendant had not filed his
statement of defence and service of the statement of claim on it is certainly
not a waiver by it. Had it filed a statement of defence but with indication
that the preliminary objection will be raised that the suit was not properly before
the Court, it would not (sic) have been a waiver. This would have distinguished
the dictum in Kano State Urban Development Board v. Fanz Construction Ltd.
(1990) 4 NWLR (Pt. 142) 1. It is therefore clear, that the defendant had not
taken any step in having the case heard by the trial Court and had not waived
its right under s.46(1) of the Edict. Obembe v. Wemabod Estates Ltd. (1977) 5
SC 115, 131-2 has no application in this case. There is no evidence of waiver
in this case.”
Of particular interest is
the dictum of the Court of Appeal in the above case quoted with approval by
Ogundare JSC (in the concurring judgment) at page 187 of the report. It was
held as follows:
“It is not enough to say
that the appellant entered an unconditional appearance and therefore he has
waived his (sic) right to complain about jurisdiction. The decision in Muni v.
Worsfold (supra) which was followed in the case of U.B.A. Trustees Ltd. v.
Nigergrob Ceramic Ltd. (sura) has determined that entering an appearance, even
unconditional, does not constitute a waiver of the right to object. It is
therefore not enough to say that the appellant having entered unconditional
appearance cannot raise the objection on the decision of the court. For it is
clear from the record that as soon as the appellant entered appearance, the
first step taken by its counsel was to protest against the jurisdiction of the
court by seeking a stay of its proceedings with a view to referring the case to
arbitration as set out in the agreement between the parties. The only step
taken after appearance therefore by the appellant was to protest against the
court hearing the case. If any step could be said to have been taken. (sic) it
is only in protestation.”
3. Confidence Insurance
Ltd. v. Trustees of O.S.C.E. (1999) 2 NWLR (Pt. 591) 373 
In this case, upon the
commencement of the suit and service of the originating process, parties
exchanged pleadings. In its statement of defence, the appellant averred that
the respondent’s action was premature as the respondents did not exhaust
arbitration as agreed in the trust deed before resorting to litigation.
Judgment was entered against the appellant and he appealed against the refusal
to stay proceedings. The appeal was dismissed with the following dictum at page
388 paragraphs A-D as follows:
“While certain acts done
by a party may or may not constitute steps in the proceedings,
nevertheless some acts will surely be construed to mean “taking steps in the
proceedings.” For example, exchange of correspondence between parties or their
counsel after entering appearance or efforts made out of court to settle the
matter in controversy between the parties or moving the court to seek a
party’s desire that the matter be placed before arbitration panel cannot
ordinarily amount to taking other steps in this proceedings as to defeat a
party’s right to rely on the arbitration provision.”
4. M. V. Lupex v. N. O.
C. (2003) 15 NWLR (Pt. 844) 469
The next case to be
considered is the case of M. V. Lupex v. N. O. C. The dispute in this
case arose between the parties in respect of a charter-party agreement which
contained a clause that disputes should be resolved by arbitration. The
Respondent sued the Appellant at the Federal High Court claiming damages for
breach of the charter-party and thereafter obtained an order ex parte
for the arrest of the chartered vessel (M.V. LUPEX) which at the time had
berthed at the port of Warri. On becoming aware of the ex parte order,
the Appellant filed a motion on notice for the following orders:
1.    
An order setting aside the order for the
arrest of the vessel, alternatively;
2.    
An order for the release of the arrested
vessel unconditionally or upon such terms as the Court may direct;
3.    
An order for stay of proceedings in the
suit sine die.
The Federal High Court
held that it had jurisdiction and refused the Appellant’s prayer to stay
proceedings. Also, the Court released the vessel on monetary condition. The
Appellant appealed to the Court of Appeal. The Court of Appeal dismissed the
appeal. The Appellant further appealed to the Supreme Court. The Supreme Court
allowed the appeal and granted stay of proceedings sine die to enable
parties resort to arbitration.
Mohammed JSC held at pages
488-489:
“Taking into consideration
all what I have considered above in this judgment, it is crystal clear that the
trial High Court could only have acted judicially and judiciously if it
exercised its discretion by ordering a stay of proceedings in the case at hand.
It is abundantly clear that the trial court had acted on wrong principles of
law and that it misapprehended the facts of this case when it refused to grant
the appellant’s application for stay of proceedings of the action filed before
it by the respondent. The court below is therefore in error to affirm the
decision of the trial Federal High Court in refusing to grant a stay of
proceedings.”
5. Enyelike v. Ogoloma
(2008) 14 NWLR (Pt. 1107) 247
In Enyelike v. Ogoloma,
the dispute arose between the parties from a lease agreement which contained an
arbitration clause. The Respondent sued the Appellant on 14th March 2000 before
the High Court of Rivers State contrary to the arbitration agreement. On 22nd
February 2000, the Appellant filed a Notice of preliminary objection seeking to
dismiss the suit. Thereafter the Appellant filed a conditional appearance out
of time and a motion for extension of time to file and serve his statement of
defence and counterclaim dated 12th February 2001. The Appellant pleaded the
arbitration agreement in his statement of defence and counterclaim.
The High Court of Rivers
State held (quoted at page 254 of the report) as follows:
“As can be seen in all the
authorities to above, there is something that a party to an arbitration cannot
do……he must not have taken any tangible step in the proceedings or as section 5
of the Arbitration Law, cap 10 put it, “taking any other steps”. In this
instant matter, the defendant/applicant not only entered a conditional
appearance out of time, after filing a motion for to enter appearance out of
time, but filed a motion on notice for an extension of time within which he can
file and serve his statement of defence and counterclaim dated 12/2/2001, and
this motion dismissing (sic) the suit for lack of jurisdiction. All these constitute
an act of “taking any other steps”
committed by the defendant/applicant and
having done so, he cannot be heard to raise the issue of non-compliance with
the arbitration clause.”
(Emphasis mine)
The Court of Appeal, Port
Harcourt agreed and held at pages 257-258 as follows:
“By virtue of the
provisions of subsection (1) of section 5 of the Arbitration and Conciliation
Act (supra), either the appellant or the respondents have the right to, at any
time after entering an appearance but before filing any pleadings (including
statement of defence) or taking any other steps (e.g. filing of motions etc),
apply to the court to stay proceedings. In the instant case, it’s rather
obvious that the appellant having already deemed it fit or expedient to file
(i) a statement of defence (ii) a counter claim to the respondents’ suit, it
was rather most inappropriate, to say the least for him to file the notice of
preliminary objection in question seeking that the suit be dismissed
.”

(Emphasis mine)
6. Onward Enterprises
Ltd. v. MV Matrix & Ors (2010) 2 NWLR (Pt. 1179) 530
This is another case in
which the Court of Appeal did not follow the hardship in Obembe case
though distinguished the earlier case from the present one. The appellant (as
plaintiff) sued the respondent claiming damages for breach of contract of
affreightment and obtained an ex parte order on 2nd July 2002 for the
arrest and detention of the respondent’s vessel (M.V. Matrix). On 15th July
2002, the respondent filed two applications. While the first application was
for release of the vessel, the second application sought to shift the vessel to
anchorage pending the hearing of the application for release. The appellant
consented to the release of the vessel on 26th July 2002. On 11th July 2003,
the respondent filed a motion for stay of proceedings pending reference to
arbitration in London. The Court granted the motion for stay of proceedings.
The Court of Appeal at
page 551 took a step to state certain steps which can be regarded as waiver of
the right to insist on arbitration agreement wherein Mshelia JCA held as
follows:
“In the instant case,
respondents entered conditional appearance and filed two motions on notice
before the application for stay. One sought the release of the vessel, while
the second sought an order to shift the vessel to anchorage. The application
for stay of proceedings was the third application filed by the respondents. For
the appellant, the application to shift the vessel in particular amounts to a
step taken in the proceedings. It is evident from the record that the
respondents did not file any statement of defence nor applied for extension of
time to file any statement of defence. I agree with the submission of
respondents’ counsel that neither the application for the release of the vessel
nor the application to shift the vessel to anchorage pending the determination
of the application to release her from arrest constitute steps taken within the
contemplation of section 5 (1) of the Arbitration and Conciliation Act. It is
only acts done in furtherance of the prosecution of the defence that could be
said to amount to steps taken in the proceedings.”
7. Nissan (Nig.) Ltd. v.
Yaganathan & Anor (2010) 4 NWLR (Pt. 1183) 135. 
The dispute in this case
arose from a contract in restraint of trade between the 1st Respondent and the
Appellant (his former employer). The contract contained arbitration clause. The
Appellant sued the 1st Respondent at the High Court of Lagos State for taking
up a new employment with the 2nd Respondent. On being served with the writ of
summons and other court process, the Respondents filed a notice of preliminary
objection seeking orders:
1.    
To strike out the suit against the 2nd
Respondent for non-disclosure of a reasonable cause of action and for being
improperly joined in the suit;
2.    
To strike out the suit for being
incompetent and non-compliant with the arbitration agreement; and
3.    
For such further orders as the Court may
make in the circumstances.
The High Court granted
prayers (i) and (ii). Also, the Court stayed further proceedings in the suit
which was not one of the prayers in the notice of preliminary objection. At the
Court of Appeal, Lagos, one of the issues was whether the High Court was right
to grant a relief not claimed. The Court of Appeal allowed the appeal in part,
holding at pages 156-157 as follows:
“From decided authorities,
it is clear that the application to refer the matter to arbitration would
succeed if the application is made at any time after the applicant enters
appearance but before filing pleadings or taking any other steps in the
proceedings. In this case, the respondents entered conditional appearance on
15th January 2007 and the next day, 16th January 2007 filed a preliminary
objection seeking order of the court striking out the suit for non-compliance
with the arbitration clause. It ought to have been not for striking out the
suit, but for stay of proceedings to enable the parties go to arbitration. …………
The order granting a stay of proceedings pending resolution of their disputes
by arbitration as agreed between the parties is correct notwithstanding that
the respondents asked that the suit be struck ou
t.”
8. Williams vs Williams
& 3 Ors. (2013) 3 CLRN 114
.
The Appellant petitioned
for the winding up of the 4th Respondent on the grounds of alleged commission
of sundry illegalities by the 1st and 2nd Respondents, the alter ego of the 4th
Respondent; and the oppressive and discriminatory conduct of members of the 4th
Respondent in relation to the running of the affairs of the 4th Respondent.
Pursuant to section 5 of
the ACA, the 1st and 2nd Respondents filed a motion for stay of proceedings
pending arbitration as agreed by parties. Before the motion was heard, counsel
to the 1st and 2nd Respondents did the following:
(a) orally applied to the
court for an adjournment;
(b) gave an undertaking in
respect of a pending motion on notice in the substantive suit; and
(c) prayed the trial court
not to grant the prayers of interim injunction in the terms sought by the
Appellant.
The Appellant contended
that the 1st and 2nd respondents took steps in the substantive suit in view of
the above. The foregoing contention notwithstanding, the court upheld the 1st
and 2nd Respondents’ motion and stayed its proceedings in the matter pending
arbitration. The court further directed the Appellant to commence arbitral
proceedings pursuant to the parties’ written agreement. Dissatisfied with the
ruling of the trial court, the Appellant appealed to the Court of Appeal where
the Appellant, relying on the Obembe’s case, forcefully contended that the 1st
and 2nd Respondents had taken a step in the proceedings. Accordingly, the
Appellant submitted that the 1st and 2nd Respondents had lost their right to
ask for a stay of proceedings pending arbitration. The Appeal was refused.
9. S. A. & Ind. Co.
Ltd. v. Ministry of Finance Incorp (2014) 10 NWLR (Pt.1416) 515.
The dispute in this case
arose from a contract for supply of fertilizer between the 1st Appellant and
Kano Government (represented by the 2nd Respondent). The contract contained
arbitration clause. The Respondents sued the Appellants at the High Court of
Kano State for balance due under the agreement and for damages. Upon being
served with the originating process, the appellants filed their respective memorandum
of conditional appearance under protest. Thereafter, without delivering
pleadings, the appellants filed a motion for stay of proceedings pending
arbitration (though the third appellant filed a motion to strike out the
suit). 
The High Court refused the
application for stay of proceedings. The Court of Appeal overruled the lower
court and granted stay of the proceedings. Nothing is said about taking step as
it was not in issue. However, the Court adopted the views expressed in Confidence
Insurance Ltd. v. The Trustees of Ondo State College of Education Staff Pension
(1999) 2 NWLR (Pt. 591) 373 at 386-387 paragraphs C-G
where Achike, JCA as
follows:
“It is perfectly clear to
me that mere entering an appearance by the appellant, be it conditional or
unconditional appearance, is not controlling nor relevant to the party’s right
to rely on the arbitration clause inserted in the parties’ agreement. On the
contrary, it is in fact what happens after a party has entered an appearance
that matters in determining whether or not such a party can still take
advantage of the aforesaid arbitration clause.”
Making a Case against Obembe
v. Wemabod
In the determination of
the application to stay judicial proceedings in order that parties may go to
arbitration, the relevant question the court should consider is whether the
party applying for stay is “guilty” of doing something in the judicial
proceedings which negates his application for stay of judicial proceedings so
as to constitute waiver of his right to insist on arbitration. If the question
is answered in the affirmative, the application for stay of judicial
proceedings should be refused. Otherwise, stay should be granted. 
However, the determination
of whether the particular step taken qualifies for waiver is not a simple
straight-forward task particularly in the face of Obembe case. Although,
as already indicated in the list of cases considered above, the courts have
done well in some cases by distinguishing the peculiarities in the Obembe case
from the one being decided to avoid the application of the sweeping statement
of Fatayi-Williams CJN that “A party who makes any application whatsoever to
the court, even though it be merely for application for extension of time,
takes a step in the proceedings”
. The Obembe case still appears to
be a law to which a lazy recourse can be easily had where there is no judicial
willingness to distinguish the facts of the case being decided from those in Obembe
case to avoid the application of the far-reaching statement of
Fatayi-Williams CJN.
With due respect, the Obembe
case is not a useful authority for any issue bordering on whether a party
has taken steps that constitutes waiver. Also, the popular statement of
Fatayi-Williams CJN is not a statement of the law, rather it is a statement
made in error as it arose from the Supreme Court’s determination of a ground of
appeal complaining against an observation made in passing by the trial
judge. The trial judge observed that “Had I been in a position on the facts
to find any of the plaintiff’s claims proved I would have been unable to enter
judgment in his favour in view of the Arbitration Clauses 17 of Exh. 3 at page
37 which parties had agreed would govern their contract.”
The foregoing
observation of the trial judge, in my respectful view, is an obiter dictum
as it did not form the basis of his dismissal of the plaintiff/appellant’s
case. 
The law is trite that it
is only against the ratio decidendi in a judgment and not an obiter
dictum
that an appeal (if any) can be lodged. The Supreme Court in A.I.C.
LTD V. NNPC (2005) 22 NSCQLR 903, at 925 (2005) 5 SC (PT. 11) 60
defined ratio
decidendi
and obiter dicta as follows: “The ratio decidendi
of a case represents the reasoning or principle or ground upon which a case is
decided. Obiter simply means in passing, incidental, cursory. Obiter dicta
reflects, inter alia, the opinions of the Judge, which do not embody the
resolution of the Court.”
The ground and issue
formulated by the appellant in the Obembe case in respect of the
observation made by the trial judge ought to have been struck out by the
Supreme Court for being incompetent. Failure to strike out the ground and the
issue led to the popular statement by Fatayi-Williams CJN that “A party who
makes any application whatsoever to the court, even though it be merely for
application for extension of time, takes a step in the proceedings”
. In CHAMI
V. UBA PLC. (2010) 6 NWLR (PT. 1191) 474 at 493 PARAGRAPHS E- F
, the
Supreme Court made the point so clear that grounds of appeal must attack the ratio,
when it held thus: “It is settled law that issues for determination
must be distilled from Grounds of Appeal which Ground(s) must attack the ratio
decidendi of the judgment not anything said by the way, or obiter dicta or be
formulated in vacuo, as issue 5 in the instant case.”
It is therefore my
humble view that the statement of Fatayi-Williams CJN was made per incuriam
which ought to be overruled or jettisoned by subsequent courts. It must be
noted however that even though the Supreme Court can depart from or overrule
the Obembe case, the Court of Appeal and all other inferior courts are
bound by it.
Generally speaking the
Supreme Court may depart from or overrule its previous decision under certain
circumstances and in accordance with laid down principles of law, such as where
it is shown or demonstrated that the earlier decision is either erroneous in
law, or given per incuriam or that it has become an instrument of
injustice etc, see Veepes Industries Ltd vs Cocoa Industries Ltd (2008) ALL
FWLR (Pt.425) 1667 at 1687; Bakare v. NRC (2007) ALL FWLR (Pt.391) 1663.
In
addition to the above, where the decision complained of hinders the proper
development of the law (e.g. the law of arbitration) in which a broad issue of
public policy was involved, the Supreme Court may depart from such a decision.
It is therefore my humble submission that the decision in Obembe case
should be overruled by another panel of the Supreme Court for being a major
impediment to the development of arbitration law in Nigeria.
The Way the Law should Go
It is clear from the
totality of cases considered that if the arbitration law must develop and be
seen to be developing in Nigeria, the court should be more inclined to granting
stay of arbitration than refusing it. The steps that a defendant is alleged to
have taken in a judicial proceeding to defeat his right to arbitration must be
so clear and positive as to constitute a waiver of his right to insist on the
resolution of the dispute by arbitration. The following steps have been
highlighted, though not exhaustive, on what a defendant can do to frustrate his
right to go to arbitration, namely:
1.    
filing an affidavit in opposition to
summons or motion for summary judgment, or
2.    
filing and/or service of a statement
defence, or
3.    
filing an interpleader summons, or
4.    
filing of a counterclaim, or
5.    
filing an application for leave to serve
interrogatories, or
6.    
filing an application for stay of
proceedings pending the giving of security or costs
7.    
filing an application for extension of time
to file and/or serve a statement of defence
8.    
filing an application for an order for
discovery
9.    
filing an application for an order for
further and better particulars,
10.                       
filing a motion to commence a third party
proceeding
This Thing Called Tax; Another Commercial Jargon? – Omotayo Akorede

This Thing Called Tax; Another Commercial Jargon? – Omotayo Akorede



Recently, there have been a lot of news
about tax avoidance and new legislations to this effect. Apart from the now
‘cliched’ decision of the
EU Competition Commission’s decision against Apple for its tax policies in Ireland, earlier
this week, Donald Trump the United States Republican presidential candidate
announced
that he will reduce the US corporate tax to 15% to boost the US economy if
elected into power. Of course, this is seen by many as the usual politician’s
rhetoric.
Skeptics have
argued that such a figure is unrealistic and will do nothing more than increase
the national debt. 

Is it that Simple?
However, for many people, including law
students and lawyers, these news makes very little sense. Systems of taxation
vary among governments, making it difficult for people to understand and which has
been described as a Gordian knot that is very difficult to untie. In simple
terms, tax is an amount of money paid to the government, on profits for sales,
procuring or for using goods and services. These charges are usually calculated
on different rates, depending on the government or type of tax. 
There are generally different type of
tax. Corporate Taxes are based on how much profits a company, for instance
Apple, earns. Income Taxes are based on how much a person earns (Salaries and
Wages). Sales Taxes are based on how much a person/entity buys (Valued added
Tax). Stamp duties are also another type of tax paid when an official document
are approved (e.g when changing the Title of a house). There are also more
specialized tax such as inheritance or estate tax, property tax etc. 
But this is not as simple as that. Many
countries charge Taxes at different rates for companies, residents and
non-residents. Corporate tax for instance in
US is 30 percent, UK 20%, Ireland 12.5% and some other countries, called Tax
havens,
have as low  as 0% (Cayman Island
for instance).
The
significance of these rates cannot be over-emphasized.
George Osborne, the UK Chancellor, has recently announced that he is ready to slash corporation
tax to less than 15% in an effort to woo businesses deterred from investing in
a post-Brexit Britain as part of his new five-point plan to galvanise the
economy, to make it super-competitive should the UK finally leave the EU.
To what
effect?
The
government uses the money it gets from taxes to pay for things. For example,
taxes are used to pay for people who work for the government, such as the 
military & police,
provide services such as 
education & health
care, and to maintain or build things like roads,
and for big projects such as the
Hinkley
Point C nuclear power plant in the UK.
It is against this backdrop that most
criticisms against Apple has flared up. About 90% of Apple’s foreign profits
are earned by the Irish subsidiaries which are highly profitable because they
hold rights to Apple’s IP.
But these Irish
entities paid little tax because they were no tax resident anywhere – a
structure, called transfer pricing, which allows companies to transfer the
returns from sales of products from one country, e.g China, Namibia etc. to a
single country, in this case Ireland, with a relatively low corporate tax rate.
However, the
Commission argues that this dubious
profit-allocation deal allowed most of their profits to a “head-office” which
existed only on paper and was tax resident in no country – allowing apple to
shrink its tax rate in Europe to well below 1% (0.005%).
Apple, which has
denied these allegations, and some other
US companies such as Starbucks and Fiat, have been able to
operate this system successfully because the US tax system operates a deferred
tax system, whereby companies could defer the payment of its tax on profits to
a convenient time in the future and which allows these companies to play around
with the money and expand on its investments.
Is there a way
forward?
Overall, there have
been recent clamp-downs on ‘tax avoidance’ and on parties that provide these
sort of tax advice. In the UK,
the HMRC has recently issued a consultation to clamp down on
accountancy firms, tax planners and law firms that provide advice on how to
avoid tax. Under the plans, enablers could have to pay a fine of up to 100% of
the tax the scheme’s underpaid.
In Indian, following the passage of a new goods-and-services tax (GST) in its upper house in August 3rd, the tax system
is undergoing a systematic reform but with a lot of uncertainties. Before the
passage of this Bill, businesses, particularly car sales, were subject to six
different levies at various rates, depending on the length of the vehicle,
engine size and ground clearance – which is now to be replaced with a single
GST rate to be applied to all goods and services. However, the rate of the GST
is still unknown, and there is still uncertainty as to when the Bill will come
into effect.
Indeed, the uneven and complex nature
of tax systems all over the world makes it easy for companies to manipulate and
difficult for regulators to ‘legally’ clamp down on such practices. Despite
calls for a uniform tax rate in the EU, there is little evidence that this will
become a reality. Others have argued that rather than tax profits that
Companies declare, the government should place taxes on the Sales made in each
country, wherever it is declared. This will have the resulting effect of
ensuring taxes are effectively paid, and that they go back to the proper
authorities and customers. The general implication of this, especially as it
relates to VAT and general accounting book-keeping principles, sums up the
complexity of this thing called Tax.

Written by

Omotayo Akorede Samuel
Final year law Student at Bangor
University.