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Legal Alert – October, 2011 – Money Laundering (Prohibition) Act, 2011
 
In this Issue:-
1. Legal Alert – October 2011 – Money Laundering (Prohibition) Act, 2011
2. Disclaimer
3. Subscribe & Unsubscribe
Legal Alert – October 2011 - Money Laundering (Prohibition) Act, 2011
Introduction:
The Money Laundering (Prohibition) Act, 2011 has repealed the Money Laundering (Prohibition) Act, 2004 by providing for, among other things, that no person or body corporate shall, except in a transaction executed through a licensed financial institution, make or accept cash payments of a sum exceeding N5,000,000 (Five Million Naira) or its equivalent in the case of an individual, or N10,000,000 (Ten Million Naira) or its equivalent in the case of a body corporate
Any Financial Institution or Designated-Financial Institution that fails to comply with the above provision by making the appropriate compliance report to the regulatory authorities commits an offence and is liable on conviction to a fine of not less than N250,000:00 (Two Hundred and Fifty Thousand Naira) for an individual and not more than N1,000,000 (One Million Naira) for a body corporate, for each day that the contravention continues unabated.
Foreign Exchange Transfers
Also, any transfer to or from a foreign country of funds or securities in excess of US$10,000 (Ten Thousand United States Dollars) or its equivalent must be reported to the Central Bank of Nigeria ("CBN"), the Securities & Exchange Commission ("SEC") and the Economic & Financial Crimes Commission ("EFCC") within seven days from the date of the transfer transaction in question. The Report must indicate the names and addresses of the Sender, and of the Receiver of the funds or securities.
Customs Declarations
Any transportation of cash or of any negotiable instrument in excess of US$10,000 or its equivalent by individuals in or out of Nigeria must be declared to the Nigeria Custom Service who in turn is obligated to report such declarations to the CBN and the EFCC.
Any person who falsely declares or fails to make a declaration to the Nigeria Custom Service in pursuance of Section 12 of the Foreign Exchange (Monitoring and Miscellaneous) Act commits an offence and is liable on conviction to forfeit not less than 25% of the undeclared funds or negotiable instrument, or to a term of imprisonment of not less than two (2) years, or to both the term of imprisonment and the forfeiture of the undeclared amount.
Know Your Customers ("KYC")
All financial institutions in Nigeria with all designated non-financial institutions like Jewelers, Car and Luxury goods distributors, Chartered Accountants, Audit Firms, Tax Practitioners, Casinos, Clearing and Settlement agents, Legal Practitioners, Supermarkets, etc are required to verify the identity of their customers and update all relevant information on the customers regularly.
Financial Institutions and designated non-financial institutions are also obligated to scrutinise all on-going transactions that they undertake on behalf of their customers by ensuring that their customers' transactions are consistent with the business and risk profile of the customers.
Where the customer is a public officer entrusted with performing a prominent public function, both within and outside Nigeria, the financial institution shall put in place for such a customer, an appropriate risk management system in addition to obtaining senior management approval to maintaining any business relationship with the public officer.
Declaration of Nature of Business – DNF
A designated non-financial institution whose business involves the one of cash transactions shall before commencing business submit to the Federal Ministry of Commerce a declaration of the nature of its business along with subsequently submitting a returns register of all its cash transactions above the limited set out in the Money Laundering (Prohibition) Act, 2011.
Also, prior to any transaction involving a sum of US$1,000 or its equivalent, the designated non-financial institution must identify the customer by requiring him to fill a standard data form and have the customer submit copies of his or her international passport, driving license, national identity card or such other document bearing his or her photograph and or as may be prescribed by the Federal Ministry of Commerce.
A designated non-financial institution that fails to comply with the collation of data on its customers, the process that is more commonly referred to as KYC, and submit the returns requirements as above stated within seven days from the date of each relevant transaction, commits an offence and is liable on conviction to a fine of N250,000:00 (Two Hundred and Fifty Thousand Naira) for each day during which the offence continues unabated.
In addition to the above-mentioned penalty, the offending party could also suffer a suspension or a revocation or a withdrawal of his or her or its operating license by the appropriate licensing authority, and as the circumstances of the offence may demand.
Surveillance of Suspicious Transactions
Suspicious transactions of a frequent, unjustifiable or unreasonable nature, surrounded with unusual and unjustifiable complexity, and that appears to have no economic justification or lawful objective, and that may involve financing or are inconsistent with the known pattern of the account or business relationship with a customer are required to the reported to the Economic and Financial Crimes Commission ("EFFC") within seven days of each of such transaction.
It is the responsibility of financial institutions and designated non-financial institutions to take all appropriate action to prevent the laundering of the proceeds of a crime or any illegal activity.
The Economic and Financial Crimes Commission with the Central Bank of Nigeria are authorised to, whenever they receive a report such as the one mentioned above, among other things, place a stop order not exceeding 72 hours on the account or transaction if it is suspected that such account is involved in the commission of a crime. This period could be extended where an application is made to the Federal High Court for such an extension.
The Federal High Court also has power to order that the funds and the accounts or securities referred to in the financial or designated non-financial Institution's report should be block forthwith.
Any institution that fails to comply with the above provisions commits an offence and is liable on conviction to a fine of N1,000,000:00 (One Million Naira) for each day during which the offence continues to be committed.
Exemption from Liability
The Directors, officers and employees of any financial institution or designated non-financial institution who complies with the provisions of this Act, in good faith, are not liable to having any civil or criminal proceedings bought against them by their customers for making a money laundering report.
Prohibition of Operating Anonymous Accounts
The opening and or maintaining of numbered or anonymous accounts by any person, financial institution or corporate body is prohibited by the Money Laundering (Prohibition) Act, 2011.
Any individual or financial institution or corporate body that contravenes the above prohibition commits an offence and is liable on conviction to a term of imprisonment of not less than two years but not more than five years in the case of an individual offender.
Corporate and financial institution contraveners of the above prohibition are liable if convicted to a fine of not less than N10Million, and not more than N50Million, for each offence committed.
Banking Secrecy and Confidentiality
Section 13(4) of the 2011 Money Laundering (Prohibition) Act provides that "banking secrecy or the preservation of customer confidentiality shall not be invoked as a ground for objecting to the measures set out in sub-section (1) and (2) of this Section or for refusing to be a witness to facts likely to constitute an offence under this Act, the Economic and Financial Crimes Commission (Establishment, etc.) Act or any other law."
Legal Practitioners & Clients Confidentiality Communications
Section 192(1) of the Evidence Act, 2011 protects professional communication between a client and his Legal Practitioner. Professional communications that are however made in furtherance of any illegal purpose or that are of any criminal or fraudulent nature are not protected from disclosure by the Lawyer/Client confidentiality rule even after the professional engagement of the Legal Practitioner has ceased.
However, where the Client elects to be a Witness in a judicial proceeding, the communication between the Client as a Witness and his Legal Practitioner will no longer be privileged provided that the subject matter of the evidence of the client is relevant to the judicial proceedings.
The parameters of a Client and Legal Practitioner privilege was tested in the matter of Abubakar v. Chuks (2007) 12 SC 1 @ 15-16 where the Supreme Court considered the provisions of the repealed Section 170 of the Evidence Act, 1945 and held that the restriction on a Legal Practitioner not to disclose at any time, confidential information between him and his client except where the Legal Practitioner has the express instructions of the client to disclose such information, does not apply to confidential communication or correspondence that are already in the public domain.
Money Laundering Offences and Penalties
Any person, whether an individual or a corporate body, who converts or transfers the resources or properties directly derived from any illegal trafficking in narcotic drugs and substances, or participates in any organised criminal group or undertakes terrorist activity, or engages in terrorism financing, human trafficking, sexual exploitation, smuggling, tax evasion, bribery and corruption, or carries out environmental crimes, kidnapping and hostage taking, illegal bunkering, illegal mining, insider trading and market manipulation, especially where these crimes are committed with the aim of either concealing or disguising the illicit origin of the resources or property or concealing any person involved in these crime(s) to evade the illegal consequences of the crimes, commits an offence under the Money Laundering (Prohibition) Act, 2011.
Barring a repetition, it is also an offence for any individual or corporation or both to collaborate in concealing or disguising the genuine nature, origin, location, disposition, movement or ownership of the resources, property or rights derived directly or indirectly from the acts mentioned above.
The penalty on conviction for any of the offences mentioned above is a term of imprisonment of not less than five years but not more than 10 years.
It is immaterial when imposing punishment that the various aspects of the subject matter offence were committed in different jurisdictions or in different parts of the world.
Other Money Laundering Offences
Additional Money Laundering Offences include:-
i) Warning or in any way intimating the owner of suspected money laundering funds, of the making of any statutory report or refraining from making such a report.
ii) Destroying or removing a register or record required to be kept under the Money Laundering (Prohibition) Act.
iii) Making or accepting cash payments contrary to the provisions of the Money Laundering (Prohibition) Act.
iv) Failing to report an international transfer of funds or securities.
v) Carrying out or attempting to carry out a money laundering offence under a false identity.
The penalties, on conviction, for the above listed offences (i) to (iii) is a term of imprisonment of not less than two years but not more than three years, or a fine of N500,000 and not more than N1,000,000.
The penalty for making or accepting cash contrary to the provisions of the Money Laundering (Prohibition) Act 2011 is a forfeiture of 25% of the excess amount received or transferred.
It is also an offence to knowingly retain the proceeds of a criminal activity, or to conspire, aid and abet the commission of a money laundering offence.
Professional Ban or Suspension
Any person that is found guilty of an offence under this law may also be banned indefinitely or for a period of five years from practicing the profession which provided the opportunity for the money laundering offence to be committed.
DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm. Recipients are therefore advised to seek professional legal advice and counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached
Subscribe & Unsubscribe to Legal Alerts
This Alert and others produced by us are provided without any charge to you and without the creation of a client-attorney relationship. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words "Subscribe – Legal Alerts" followed by the desired email address.
You are equally free to terminate your subscription by sending to us a one line email with the words "Unsubscribe - Legal Alerts" and your electronic address would be removed from our list. In the future, you can return to our mailing list by visiting our web site www.oseroghoassociates.com to subscribe for the Legal Alerts.

Legal Alert – October, 2011 – Money Laundering (Prohibition) Act, 2011

 

In this Issue:-

 

1.                 Legal Alert – October 2011 – Money Laundering (Prohibition) Act, 2011

2.                 Disclaimer

3.                 Subscribe & Unsubscribe

 

Legal Alert – October 2011 - Money Laundering (Prohibition) Act, 2011

 

Introduction:

 

The Money Laundering (Prohibition) Act, 2011 has repealed the Money Laundering (Prohibition) Act, 2004 by providing for, among other things, that no person or body corporate shall, except in a transaction executed through a licensed financial institution, make or accept cash payments of a sum exceeding N5,000,000 (Five Million Naira) or its equivalent in the case of an individual, or N10,000,000 (Ten Million Naira) or its equivalent in the case of a body corporate

 

Any Financial Institution or Designated-Financial Institution that fails to comply with the above provision by making the appropriate compliance report to the regulatory authorities commits an offence and is liable on conviction to a fine of not less than N250,000:00 (Two Hundred and Fifty Thousand Naira) for an individual and not more than N1,000,000 (One Million Naira) for a body corporate, for each day that the contravention continues unabated.

 

Foreign Exchange Transfers

 

Also, any transfer to or from a foreign country of funds or securities in excess of US$10,000 (Ten Thousand United States Dollars) or its equivalent must be reported to the Central Bank of Nigeria (“CBN”), the Securities & Exchange Commission (“SEC”) and the Economic & Financial Crimes Commission (“EFCC”) within seven days from the date of the transfer transaction in question. The Report must indicate the names and addresses of the Sender, and of the Receiver of the funds or securities.

 

Customs Declarations

 

Any transportation of cash or of any negotiable instrument in excess of US$10,000 or its equivalent by individuals in or out of Nigeria must be declared to the Nigeria Custom Service who in turn is obligated to report such declarations to the CBN and the EFCC.

 

Any person who falsely declares or fails to make a declaration to the Nigeria Custom Service in pursuance of Section 12 of the Foreign Exchange (Monitoring and Miscellaneous) Act commits an offence and is liable on conviction to forfeit not less than 25% of the undeclared funds or negotiable instrument, or to a term of imprisonment of not less than two (2) years, or to both the term of imprisonment and the forfeiture of the undeclared amount.

 

Know Your Customers (“KYC”)

 

All financial institutions in Nigeria with all designated non-financial institutions like Jewelers, Car and Luxury goods distributors, Chartered Accountants, Audit Firms, Tax Practitioners, Casinos, Clearing and Settlement agents, Legal Practitioners, Supermarkets, etc are required to verify the identity of their customers and update all relevant information on the customers regularly.

 

Financial Institutions and designated non-financial institutions are also obligated to scrutinise all on-going transactions that they undertake on behalf of their customers by ensuring that their customers’ transactions are consistent with the business and risk profile of the customers.

 

Where the customer is a public officer entrusted with performing a prominent public function, both within and outside Nigeria, the financial institution shall put in place for such a customer, an appropriate risk management system in addition to obtaining senior management approval to maintaining any business relationship with the public officer.

 

Declaration of Nature of Business – DNF

 

A designated non-financial institution whose business involves the one of cash transactions shall before commencing business submit to the Federal Ministry of Commerce a declaration of the nature of its business along with subsequently submitting a returns register of all its cash transactions above the limited set out in the Money Laundering (Prohibition) Act, 2011.

 

Also, prior to any transaction involving a sum of US$1,000 or its equivalent, the designated non-financial institution must identify the customer by requiring him to fill a standard data form and have the customer submit copies of his or her international passport, driving license, national identity card or such other document bearing his or her photograph and or as may be prescribed by the Federal Ministry of Commerce.

 

A designated non-financial institution that fails to comply with the collation of data on its customers, the process that is more commonly referred to as KYC, and submit the returns requirements as above stated within seven days from the date of each relevant transaction, commits an offence and is liable on conviction to a fine of N250,000:00 (Two Hundred and Fifty Thousand Naira) for each day during which the offence continues unabated.

 

In addition to the above-mentioned penalty, the offending party could also suffer a suspension or a revocation or a withdrawal of his or her or its operating license by the appropriate licensing authority, and as the circumstances of the offence may demand.

 

Surveillance of Suspicious Transactions

 

Suspicious transactions of a frequent, unjustifiable or unreasonable nature, surrounded with unusual and unjustifiable complexity, and that appears to have no economic justification or lawful objective, and that may involve financing or are inconsistent with the known pattern of the account or business relationship with a customer are required to the reported to the Economic and Financial Crimes Commission (“EFFC”) within seven days of each of such transaction.

 

It is the responsibility of financial institutions and designated non-financial institutions to take all appropriate action to prevent the laundering of the proceeds of a crime or any illegal activity.

 

The Economic and Financial Crimes Commission with the Central Bank of Nigeria are authorised to, whenever they receive a report such as the one mentioned above, among other things, place a stop order not exceeding 72 hours on the account or transaction if it is suspected that such account is involved in the commission of a crime. This period could be extended where an application is made to the Federal High Court for such an extension.

 

The Federal High Court also has power to order that the funds and the accounts or securities referred to in the financial or designated non-financial Institution’s report should be block forthwith.

 

Any institution that fails to comply with the above provisions commits an offence and is liable on conviction to a fine of N1,000,000:00 (One Million Naira) for each day during which the offence continues to be committed.

 

Exemption from Liability

 

The Directors, officers and employees of any financial institution or designated non-financial institution who complies with the provisions of this Act, in good faith, are not liable to having any civil or criminal proceedings bought against them by their customers for making a money laundering report.

 

Prohibition of Operating Anonymous Accounts

 

The opening and or maintaining of numbered or anonymous accounts by any person, financial institution or corporate body is prohibited by the Money Laundering (Prohibition) Act, 2011.

 

Any individual or financial institution or corporate body that contravenes the above prohibition commits an offence and is liable on conviction to a term of imprisonment of not less than two years but not more than five years in the case of an individual offender.

 

Corporate and financial institution contraveners of the above prohibition are liable if convicted to a fine of not less than N10Million, and not more than N50Million, for each offence committed.

 

Banking Secrecy and Confidentiality

 

Section 13(4) of the 2011 Money Laundering (Prohibition) Act provides that “banking secrecy or the preservation of customer confidentiality shall not be invoked as a ground for objecting to the measures set out in sub-section (1) and (2) of this Section or for refusing to be a witness to facts likely to constitute an offence under this Act, the Economic and Financial Crimes Commission (Establishment, etc.) Act or any other law.”

 

Legal Practitioners & Clients Confidentiality Communications

 

Section 192(1) of the Evidence Act, 2011 protects professional communication between a client and his Legal Practitioner. Professional communications that are however made in furtherance of any illegal purpose or that are of any criminal or fraudulent nature are not protected from disclosure by the Lawyer/Client confidentiality rule even after the professional engagement of the Legal Practitioner has ceased.

 

However, where the Client elects to be a Witness in a judicial proceeding, the communication between the Client as a Witness and his Legal Practitioner will no longer be privileged provided that the subject matter of the evidence of the client is relevant to the judicial proceedings.

 

The parameters of a Client and Legal Practitioner privilege was tested in the matter of Abubakar v. Chuks (2007) 12 SC 1 @ 15-16 where the Supreme Court considered the provisions of the repealed Section 170 of the Evidence Act, 1945 and held that the restriction on a Legal Practitioner not to disclose at any time, confidential information between him and his client except where the Legal Practitioner has the express instructions of the client to disclose such information, does not apply to confidential communication or correspondence that are already in the public domain.

 

Money Laundering Offences and Penalties

 

Any person, whether an individual or a corporate body, who converts or transfers the resources or properties directly derived from any illegal trafficking in narcotic drugs and substances, or participates in any organised criminal group or undertakes terrorist activity, or engages in terrorism financing, human trafficking, sexual exploitation, smuggling, tax evasion, bribery and corruption, or carries out environmental crimes, kidnapping and hostage taking, illegal bunkering, illegal mining, insider trading and market manipulation, especially where these crimes are committed with the aim of either concealing or disguising the illicit origin of the resources or property or concealing any person involved in these crime(s) to evade the illegal consequences of the crimes, commits an offence under the Money Laundering (Prohibition) Act, 2011.

 

Barring a repetition, it is also an offence for any individual or corporation or both to collaborate in concealing or disguising the genuine nature, origin, location, disposition, movement or ownership of the resources, property or rights derived directly or indirectly from the acts mentioned above.

 

The penalty on conviction for any of the offences mentioned above is a term of imprisonment of not less than five years but not more than 10 years.

 

It is immaterial when imposing punishment that the various aspects of the subject matter offence were committed in different jurisdictions or in different parts of the world.

 

Other Money Laundering Offences

 

Additional Money Laundering Offences include:-

 

i)                 Warning or in any way intimating the owner of suspected money laundering funds, of the making of any statutory report or refraining from making such a report.

 

ii)               Destroying or removing a register or record required to be kept under the Money Laundering (Prohibition) Act.

 

iii)         Making or accepting cash payments contrary to the provisions of the Money Laundering (Prohibition) Act.

 

iv)         Failing to report an international transfer of funds or securities.

 

v)              Carrying out or attempting to carry out a money laundering offence under a false identity.

 

The penalties, on conviction, for the above listed offences (i) to (iii) is a term of imprisonment of not less than two years but not more than three years, or a fine of N500,000 and not more than N1,000,000.

 

The penalty for making or accepting cash contrary to the provisions of the Money Laundering (Prohibition) Act 2011 is a forfeiture of 25% of the excess amount received or transferred.

 

It is also an offence to knowingly retain the proceeds of a criminal activity, or to conspire, aid and abet the commission of a money laundering offence.

 

Professional Ban or Suspension

 

Any person that is found guilty of an offence under this law may also be banned indefinitely or for a period of five years from practicing the profession which provided the opportunity for the money laundering offence to be committed.

 

 

DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm. Recipients are therefore advised to seek professional legal advice and counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.

 

This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached

 

Subscribe & Unsubscribe to Legal Alerts

 

This Alert and others produced by us are provided without any charge to you and without the creation of a client-attorney relationship. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words “Subscribe – Legal Alerts” followed by the desired email address.

 

You are equally free to terminate your subscription by sending to us a one line email with the words “Unsubscribe - Legal Alerts” and your electronic address would be removed from our list. In the future, you can return to our mailing list by visiting our web site www.oseroghoassociates.com to subscribe for the Legal Alerts.

Legal Alert – September 2011 – Sovereign Investment Authority Act, 2011
 
In this Issue:-
1. Legal News – Lagos State Home Ownership Mortgage Scheme
2. Legal Alert – September 2011 – Nigeria's Sovereign Investment Authority (Establishment, Etc.) Act, 2011
3. Disclaimer
4. Subscribe & Unsubscribe
Legal News
To address the insufficient housing stock associated with the efficient implementation of the new Tenancy Law in Lagos State, the Lagos State Government has introduced a Home Ownership Mortgage Scheme to assist first-time home buyers, resident in Lagos State, the opportunity to own their own homes.
Also, a Housing Arbitration Rules, to be read in conjunction with the Lagos State Arbitration Law 2009, have also being published to cater for any dispute arising from the Lagos Home Ownership Mortgage Scheme.
For more details on the above, you can visit the Lagos State website, www.lagosstate.gov.ng
Legal Alert – Nigeria Sovereign Wealth Fund -Introduction
The Nigerian Government has passed into law the Sovereign Investment Authority (Establishment, Etc.) Act, 2011 ("NSWF Act"), to among other things, establish a Nigerian Sovereign Investment Authority. This Authority has the responsibility to receive, manage and invest in diversified portfolios the medium and long-term revenue of the Federal Government of Nigeria, the 36 State Governments, the Federal Capital Territory, all the Local Government Areas and all the Area Councils in Nigeria.
The NSWF legislation is necessitated by the depletion and the non-renewable nature of the hydrocarbon resources in Nigeria, and the need to develop critical infrastructure that would attract investment and diverse the Nigerian economy.
Nigeria Sovereign Investment Authority – Establishment
In addition to the objective stated above, the Nigeria Sovereign Investment Authority ("NSIA") is established to acquire, hold and dispose of movable and immovable assets for the purpose of building a savings base for the Nigerian people, in addition to enhancing the development of infrastructural facilities in Nigeria, and further, providing a stabilisation support to Nigeria in times of economic stress.
Independent Authority
The NSIA is an independent authority that is not subject to the direction or control of any person or body except as provided for in the NSWF Act.
Some of the measures designed to protect the assets of the Authority include the statutory provision that the assets of the Authority are to be diversified while no Asset Manager to the Authority shall be appointed or act as its Custodian at the same time in respect of the assets of the Authority and or of the Fund. In addition, one or more Custodians are to be appointed for the investments held by the Authority.
Funding of the SWF Authority
The take-off funds to be managed by the Authority is the Naira equivalent sum of $1,000,000,000 (One Billion United States Dollars). This sum is to be contributed by the Federal Government, the State Governments, the Federal Capital Territory, the Local Governments and the Area Councils in the pro-rata basis of their share of the total Revenue from the Federation Account as provided for in the Allocation of Revenue (Federation Account, etc) Act, 2004.
Subsequent funds to be managed by the Sovereign Wealth Authority are to be derived from the Residual funds in the Federation Account with the derivation portion of the revenue allocation expressly excluded from this arrangement.
The various tiers of governments in Nigeria, as owners of the sovereign wealth fund, are not allowed to transfer, redeem, assign, dispose, sell, mortgage, pledge or otherwise encumber any of their interest in the SWF.
Insurance, Indemnities, Taxation, etc
The Directors of the SWF Authority are protected by insurance policies and indemnified in line with best International Standards whilst they carry out their duties in accordance with the NSWF Act.
The provisions of the Public Officers' Protection Act, which provides, among other things, that law suits against public officers can only be commenced within three (3) months after the act, neglect or default complained about, is also available to the SWF Authority, its Directors, Board and officers.
On the matters of taxation, the SWF Authority, its wholly owned subsidiaries and affiliates are exempted from the provisions of any and all taxes, imports and similar fiscal laws and regulations enacted by any tier of government in Nigeria.
The employees of the Authority and its wholly owned subsidiary are however liable to pay personal income tax and claim any tax benefits as provided for in any international treaty to which Nigeria is a signatory.
The SWF Authority and any Financial Instrument created by this Authority in furtherance of its statutory objectives are also exempted from the provisions of the Investments and Securities Act 2007, and the Banks and Other Financial Institutions Act 2004, and any amendments to these legislation from time to time shall not apply to the SWF Authority.
The provisions of the NWSF Act shall prevail where any law or enactment relating to or similar to its operations are inconsistent with the NSWF Act.
Constitutionality of Nigeria Sovereign Investment Authority Act
The legislative powers of the Federal Republic of Nigeria is vested in the National Assembly who have the powers to legislate on the matters enumerated in the Exclusive Legislative List as set out in Part 1 of the Second Schedule of the 1999 Constitution (as amended).
Section 80 (1) of the 1999 Constitution (as amended) provides that all revenues received or raised by the Federal Republic of Nigeria shall be paid into one Consolidated Revenue Fund for the benefit of the entire Federation of Nigeria. The exception to this provision is where by a Law passed by the National Assembly, a specific public fund is created for a specific public purpose, like the Sovereign Investment Authority to manage Nigeria's Sovereign Wealth Fund.
Conclusion
Opposition to the constitutionality or legality of the NSWF Act will remain misplaced until the 1999 Constitution (as amended) is further amended to devolve more legislative authority, responsibilities and revenues on the States and Local Governments Areas as should be the case in a Federal System of Government, as opposed to the current "Unitary'' System of government in Nigeria.
Pending the further amendment to the 1999 Constitution, to be reflective of a true Federal system of government, the method of appointments and representations on the Council and the Board of Directors of the Sovereign Investment Authority of Nigeria needs to reflect true independence and the protection of the contributors from a very strong Federal Government or a conniving group of State Governments. The machinery to enshrine good corporate governance and prevent conflict of interest in the entire present structure cannot be guaranteed until the 1999 Constitution (as amended) and the NSWF Act are amended.
The last comment is that the NSWF Act does not provide for a transparent incentive package for the managers of the fund as is the practice in the private sector. The likelihood of public sector bureaucracy and non-meritocracy could therefore erode this fund.
DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm. Recipients are therefore advised to seek professional legal advice and counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached
Subscribe & Unsubscribe to Legal Alerts
This Alert and others produced by us are provided without any charge to you and without the creation of a client-attorney relationship. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words "Subscribe – Legal Alerts" followed by the desired email address.
You are equally free to terminate your subscription by sending to us a one line email with the words "Unsubscribe - Legal Alerts" and your electronic address would be removed from our list. In the future, you can return to our mailing list by visiting our web site www.oseroghoassociates.com to subscribe for the Legal Alerts.
Legal Alert – August 2011 – Oil and Gas Local Content Act
 
In this Issue:-
1. Legal News – New Tenancy Law in Lagos.
2. Executive Summary on the Nigerian Oil and Gas Industry Content Development Act.
3. Full Legal Alert – August 2011 – The Nigerian Oil and Gas Industry Content Development Act
4. Disclaimer
5. Subscribe & Unsubscribe
Legal News – New Lagos State Tenancy Law
The Lagos State Government has signed into law a new Tenancy legislation which prohibits Landlords in Lagos State from collecting rentals in excess of six (6) months from a sitting (existing) tenant, and not more than one (1) year's rent from a new tenant. On conviction, the penalty for a breach of these provisions, is a three (3) months jail time or a fine of N100,000:00 (One Hundred Thousand Naira).
Fuller details of the provisions of this Law and how it affects you will be provided in our subsequent newsletters.
Executive Summary – Oil and Gas Local Content Law
This is a very important legislation to which it is recommended that some time be dedicated to appreciate its provisions. A summary of the high points of this law are provided in this section while fuller details are provided after the summaries.
a. The Nigerian Oil and Gas Industry Content Development Act, 2010 ("the Oil and Gas Local Content Act") was enacted to provide for the development of an-all inclusive Nigerian Local Content to maximise the benefits in the Nigerian Oil and Gas Industry.
b. The provisions of the Oil and Gas Local Content Act now supersede similar provisions in the Petroleum Act or in any other enactment or law pertaining to the development of a local content in the Nigerian oil and gas industry.
c. Nigerian Independent Operators, with proven capacity, shall be given the first consideration in the award of oil blocks, oil field licences, oil lifting licences and in all projects for which a contract is to be awarded in the Nigerian oil and gas industry subject to such conditions as may be specified from time to time by the Minister of Petroleum.
d. The Nigerian Oil and Gas Content Development and Monitoring Board ("the Content Monitoring Board") is established, as regulator, to among other things implement, supervise, coordinate, administer, monitor and manage the various provisions of the Oil and Gas Local Content Development Act, with the Regulations that will be made by the Minister for Petroleum Resources, in furtherance of the provisions of this Law.
e. Any bid for any license, permit or interest in the Nigerian oil and gas industry must be accompanied by a Nigerian Content Plan which the local content regulator must review and issue a certificate of authorisation if the Content Plan complies with the provisions of the Nigerian Oil and Gas Local Content Act.
f. All operators and promoters in the Nigerian oil and gas industry are required to give to Nigerians, especially those operating in the oil and gas producing communities, the first consideration when acquiring goods and services, employing personnel or training existing personnel. Operators are compulsorily required to submit at regular intervals, a employment, training and succession plan.
g. Operators and Promoters in the Nigerian oil and gas industry are also required to engage the services of only financial institutions and professionals registered and licensed by Nigerian professional bodies.
h. Operations and corporations in breach of the provisions of this law are liable on conviction to a fine of 5% of the value of the contract in addition to a possible cancellation of such a contract or contracts.
Legal Alert – Oil and Gas Content Law
The enactment of the Nigerian Oil and Gas Industry Content Development Act, which is now more commonly referred to as "the Oil and Gas Local Content Act", is the accumulation of many years of agitation for more protectionist legislation for Nigerian Citizens who have always desired to have a greater participation in the very profitable Oil and Gas sector of the Nigerian economy.
An examination of the provisions of the Nigerian Oil and Gas Industry Content Development Act ("the Oil and Gas Local Content Act") is desirable in the light of previous government policies and regulations governing the Department of Petroleum Resources ("DPR") and the Nigerian National Petroleum Corporation ("NNPC"), which policies and regulations did not develop a competitive Nigerian local content in the oil and gas industry.
The Oil and Gas Local Content Act – Introduction
The Nigerian Oil and Gas Industry Content Development Act, 2010 ("the Oil and Gas Local Content Act") was enacted to provide for the development of an all inclusive Nigerian Local Content to maximise the benefits in the Nigerian Oil and Gas Industry, plan, supervise, coordinate, monitor and implement the Nigerian Oil and Gas local content policies, and other matters related to the development of the Nigerian content or capacity in the oil and gas industry.
The provisions of the Oil and Gas Local Content Act accordingly now supersede similar provisions in the Petroleum Act or in any other enactment or law pertaining to the development of a local content in the Nigerian oil and gas industry.
Nigerian Operators – First Consideration
The Oil and Gas Local Content Act requires that "Nigerian Independent Operators shall be given the first consideration in the award of oil blocks, oil field licences, oil lifting licences and in all projects for which a contract is to be awarded in the Nigerian oil and gas industry subject to such conditions as may be specified by the Minister."
Similarly, Nigerian Indigenous service companies that demonstrate ownership of sufficient equipment, sufficient Nigerian personnel and capacity to execute such works on land and in swampy operating areas of the Nigerian oil and gas industry are to be given exclusive consideration in the award of contracts in the areas where the projects are located.
Compliance with the provisions of the Nigerian Oil and Gas Local Content Development Act is a major criteria in considering firms and corporations to whom licenses, permits and any other commercial interest in any oil and gas exploration, production, transportation, development, and any other operations in the Nigerian oil and gas industry, will be granted.
Nigerian Local Content Monitoring Board
The regulator and enforcer of the Nigerian Oil and Gas Local Content Development legislation is the Nigerian Content Development and Monitoring Board. This Board is mandated to make procedures that will guide, monitor, coordinate and implement the provisions of the Oil and Gas Local Content Development Act.
The Oil and Gas Local Content Development and Monitoring Board ("the Board") is also statutorily required to ensure that, in a measurable manner, there is the continuous growth of Nigerian local content in all oil and gas arrangements, projects, operations, activities or transactions in the Nigerian oil and gas industry.
Nigerian Content Plan – Evaluation
Any bid for any license, permit or interest in the Nigerian oil and gas industry must be accompanied by a Nigerian Content Plan which the local content regulator must review and issue a certificate of authorisation if the Content Plan complies with the provisions of the Nigerian Oil and Gas Local Content Act.
Also, all operators and project promoters are mandatorily required to consider a Nigerian content when evaluating any bid where the bids or bids are within 1% of each other at commercial stage, and the bid with the highest level of Nigerian content is to be selected provided that the selected bid is at least 5% higher than its closest competitor.
Other attempts to develop a genuine Nigerian Content in the Oil and Gas Industry in Nigerian include:-
(a) Operators and alliance partners in the oil and gas industry in Nigeria must maintain a biding process for acquiring goods and services which give full and fair opportunity to Nigerian indigenous contractors and companies.
(b) A Nigerian indigenous company's bid, with proven capacity, shall not be disqualified solely on the basis that it is not the lowest financial bid provided that the value of such a bid does not exceed the lowest bid price by 10% (ten per cent).
Employment, Training and Succession Plan for Nigerians in the Oil & Gas Industry
Every operator is required to establish in its catchment area of operation(s) or in the community in Nigeria where it carries on its oil and gas operations, a project office where its project management and procurement decisions making processes must take place. All operators are also required by this Law to give Nigerians the first consideration when employing personnel, or training any of their existing personnel in any project to be executed by any of the operators or by any project promoter in the Nigerian Oil and Gas Industry.
It is in turn the responsibility of the Oil and Gas Local Content Board to ensure that all operators and project promoters' maintain a reasonable number of personnel from within the indigenous community where the operator or promoter has a significant oil and gas operation or operations. The Board undertakes this responsibility by, among other things, requiring the operators or promoters to regularly submit a Employment, Training and Succession Plan.
All foreign operators and promoters in the Oil and Gas Industry in Nigeria are further required to retain a maximum of 5% (five per cent) of all management positions to cater for their investors interests. Only Nigerians can however be employed in the junior and intermediate cadre or grades. Applications for Expatriate Quota positions can now only be made after the prior written approval of the Nigerian Oil and Gas Local Content Board has been obtained.
Local Content Research and Development
The Minister for Petroleum Resources ("the Minister) is required by this law to make regulations with requirements and targets for the growth of research and development in the Nigerian oil and gas industry. This Minister is also required to make regulations establishing the minimum standards, facilities, personnel and technology for training in the oil and gas industry.
All operators and promoters are also required to submit a Research and Development Plan ("R & D Plan") which encompasses the promotion of education, industrial attachments, employees training, research and development in Nigerian in relation to the operators and promoters activities in Nigeria. The R & D Plan must be updated every six months.
The Minister is also empowered, after consulting with other stakeholders in the oil and gas industry, to develop a fiscal framework with tax incentives for investors in the oil and gas manufacturing and fabrication sectors, who locally produce such products or services which were previously imported into Nigeria.
Professional Services.
Operators and promoters engaged in the provision of engineering and other professional services in the Nigerian Oil and Gas Industry are required to engage the services of only professionals registered with the relevant professional bodies in Nigeria.
INSURANCE. All operators, alliance partners and Nigerian indigenous companies engaged in any form of business, operation or contract in the Nigerian Oil and Gas Industry must insure all their insurable risks relating to their oil and gas businesses, operations or contracts with a Nigerian registered and licensed insurance company through an insurance broker, all of whom must be licensed in accordance with the provisions of the Insurance Act (as amended).
Section 50 of the Oil and Gas Local Content Act also provides that no insurance risk in the Nigerian oil and gas industry shall be placed offshore without the written approval of the Nigerian Insurance Commission, and this Insurance Commission must ensure that all local insurance capacity have been exhausted before giving such a waiver.
LEGAL SERVICES. All operators, contractors and other entities engaged in any operation, business or transaction in the Nigerian Oil and Gas industry who require legal services must retain only the services of a Nigerian Barrister and Solicitor whose name is on the roll of Barristers and Solicitors at the Supreme Court of Nigeria, or a firm of Nigerian Legal Practitioners whose office is located in any part of Nigeria.
FINANCIAL SERVICES. All operators, contractors and any other entity engaged in any operation or business transaction in the Nigerian Oil and Gas industry requiring financial services must retain the services of a Nigerian licensed financial institution or organisation except where the Oil and Gas Local Content Board is satisfied that it is impracticable to do so.
The Oil and Gas Local Content Act also requires that 10% (ten per cent) of the total revenue accruing to any operator from its activities in the Nigerian oil and gas industry must be retained in a Nigerian bank account.
WELDING & FABRICATION. All operators, project promoters, contractors and any other entity engaged in the Nigerian oil and gas industry must carry out all fabrication and welding activities inside Nigeria.
Nigerian Content Monitoring Board
A Nigerian Oil and Gas Content Monitoring Board ("the Content Monitoring Board") is established to among other things implement, supervise, coordinate, administer, monitor and manage the various provisions of the Nigerian Oil and Gas Content Development Act and the Regulations made by the Minister for Petroleum Resources, in furtherance of the provisions of this Law.
A Governing Council is also established to manage and superintend the affairs of the Content Monitoring Board, in addition to making rules and regulations for the proper functioning of this Board.
All the functions and powers previously conferred on any government agency or Department to implement a Nigerian Content Development policy for the oil and gas industry are now exclusively vested in the Oil and Gas Local Development Board.
Nigerian Content Development Fund
A Nigerian Content Development Fund ("the Content Fund") is created by the Oil and Gas Local Content Act to assist in the funding of the implementation of the Nigerian Oil and Gas Content Development and Monitoring activities.
One per cent (1%) of the value of every contract awarded to any operator, contractor, subcontractor, alliance partner or any other entity involved in any project, operation, activity or transaction in the upstream sector of the Nigerian oil and gas industry shall be deducted at source and paid to the Oil and Gas Local Content Development Fund.
Offences and Penalties
Any Operator or Corporation that fails to comply with any of the provisions of the Oil and Gas Local Content Act commits an offence and is liable on conviction to a fine of 5% of the contract sum or sums, in addition to a possible cancellation of the contract.
Conclusion
The Oil and Gas Local Content Act is a continuation of the promotion of the oil and gas industry as the principal, if not the sole, foreign exchange earner for the Nigerian government. This is in contrast with other major oil and gas producing countries who have continued to use their oil and gas resources to diverse their economies to non-oil and gas segments in recognition of the reality that oil and gas is not a renewable energy resource.
Also, previous Nigerian Government regulations and or policies for the development of a local content for Nigerians operating or intending to operate in the oil and gas sector of the Nigerian economy failed because, among other reasons, Nigeria has not developed sufficient twenty-first century human capacity that is properly trained to regulate and participate in the Nigerian Oil and Gas Industry.
The transitional period of three years before the implementation of the full localisation of the production of many items for the oil and gas industry is unrealistic in the light of poor public power generation and distribution, high costs of private power generation from private generators, in addition to untrained local manpower to run the factories.
The attempt by government to impose a competitive educational development system on the operators and other stakeholders in the Nigerian oil and gas sector will not meet the economic development objectives of the Nigerian economy as this function is the constitutional responsibility of the Nigerian government.
The Oil and Gas Local Content Development Act is however commended as the first legislation that consolidates in a single legislation the various prior local content development legislations, from petroleum to engineering, to labour to legal, to financial and insurance services.
DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm. Recipients are therefore advised to seek professional legal advice and counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached
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Legal Alert – June 2011 – Employees' and Trade Unions
 
In this Issue:-
1. Legal Alert – June 2011 – Employees' Rights and Trade Unions
2. Disclaimer
3. Subscribe & Unsubscribe
Introduction
The privatisation with the resulting expansion of many previously owned government corporations by private corporations, and the liberalisation of many sectors of the Nigerian economy should have lead to the enhancement of the constitutional rights of employees to freely join Trade Unions for the protection of their employment rights. This has unfortunately not occurred.
The politicisation of the existing Trade Unions' groups has equally undermined the institutionalisation of best Trade Union practices in Nigeria.
Employers' resistance to Trade Unions' groups could be attributable to the lack of a proper understanding and or appreciation of the current legislations on the subject matter of Trade Unions Law in Nigeria, and the benefits that such Trade Unions bring to both the private and public sectors of the Nigerian economy.
This Legal Alert seeks to bridge the information gap by providing you with an understanding of the provisions in the Trade Union's Act (as amended) with other related legislations under Nigerian Law.
Who is a Trade Union?
The Trade Unions Act defines a Trade Union to be a combination of employees, or of employers, whether on temporary or a permanent employment basis, who come together with the primary purpose or objective of regulating the terms and conditions of the employment of employees, and resisting any practice that is in restraint of trade, and lawfully applying its funds to providing benefits to its members which benefits must not political in nature.
Registration of Trade Unions
It is mandatory that a Trade Union, before it commences the execution of its objectives, must apply for and be registered by the Registrar of Trade Unions in accordance with the provisions of the Trade Unions Act (as amended).
An application for the registration of a Trade Union can only be made, in the case of a Trade Union of employees, by at least fifty (50) members of the Trade Union executing/signing the Trade Union's application form; and in the case of a Trade Union of employers, the application form must be signed by at least two members of the Trade Union of employers.
However, a Trade Union will not be registered where:-
(a) There is evidence that there already exist a registered Trade Union that sufficiently represents the interest of the employees or of the employer in a class or industry whose interest the Trade Union intending registration, wishes to represent its members. See the Supreme Court's decision in The Registered Trustees of the National Association of Community Health Practitioners of Nigeria & Others v. Medical & Health Workers Union of Nigeria & Others (2008) 1 SC (part. III) 1.
(b) The proposed name of the Trade Union closely resembles that of an existing and registered Trade Union so as to be likely to deceive the members of the public or the members of the Trade Union itself.
(c) The purpose or objectives of the Trade Union is/are unlawful.
(d) The consent of the members of the Trade Union was/were obtained by force or by fraud.
(e) The purpose of the Trade Union has ceased to exist or the Trade Union has ceased to function.
Membership of Trade Unions
No employee of a company, who is recognised as a projection of the management team of such a company or who is within the management structure of the company, can be a member of or hold office in any Trade Union in Nigeria. This proviso is to ensure that there are no conflict of interest issues in the administration of Trade Unions in Nigeria.
Also, no employee or employer can be an executive official in more than one Trade Union, at any one given time.
The membership of a Trade Union cannot be denied of an employee or an employer on grounds of ethnicity, race, religions beliefs or political opinions or affiliations.
Members of the Armed Forces, Police Force, Custom Service, Nigerian Security Printing & Minting Company, Central Bank of Nigeria, Nigerian Telecommunications Limited and every Federal or State Government establishment whose employees bear arms, cannot join or form a Trade Union. They can however establish consultative committees to protect their employment interests.
Effect of Non registration of a Trade Union.
A Trade Union cannot lawfully perform any of its objectives unless and until it is registered by the Registrar of Trade Unions. A breach of this statutory provision by a Trade Union ascribes to the Trade Union and every official of the Trade Union, with any member of the Trade Union that takes active part in the breach, legal liability and penalties as prescribed in the Trade Unions Act (as amended).
Employers are statutorily required to recognise and deal with a registered Trade Union to which their employees have registered their membership in accordance with the provisions of the Trade Unions Act (as amended). It is an offence for an employer to refuse to recognise a registered Trade Union. The liability on conviction is a fine in the paltry sum of N1,000:00 (One Thousand Naira).
Funds of a Trade Union
Employers whose employees belong to a Trade Union, or Trade Unions, are required by the Trade Unions Act (as amended) to deduct Trade Unions dues' from the wages or salaries of every such employee(s), and to remit such trade union dues' deductions to the registered office of the Trade Union concerned within a reasonable period of time or within such period as may be prescribed from time to time by the Registrar of Trade Unions.
Trade Unions are in turn required to pay to the appropriate Federation of Trade Unions, out of the contributions or trade union dues that the Trade Unions have received from their members, such a percentage of the dues as may be prescribed in the Constitution of the Federation of Trade Unions concerned.
Any Trade Union that defaults in remitting its contributions to the Federation of Trade Unions concerned shall be guilty of an offence and shall be liable on conviction to a fine of two times the said contribution.
Application of Trade Union Funds
The subscriptions and or dues contributed by the members of a Trade Union, with other funds belonging to a Trade Union, are not to be applied directly or indirectly, or otherwise to further any political objective or agenda. Where the funds of a Trade Union are applied in the furtherance of a political objective, the Trade Union and every official thereof shall be guilty of an offence.
Also, no person shall apply the funds of a Trade Union, whether directly or through any other Trade Union, or some other association or body, to prosecute any legal proceedings relating to such a person's election or appointment into any office in a Trade Union.
Any person who applies the funds of a Trade Union to purposes that are expressly prohibited under the Trade Unions Act (as amended) will be guilty of an offence and liable on conviction to a paltry fine of (N5,000:00) Five Thousand Naira.
The Benefits of Trade Unions Registration
One of the primary benefits for the registration of a Trade Union is that a Trade Union, once registered, assumes a legal personality of its own, with the legal capacity to negotiate collectively on behalf of its members' better employment conditions using the most modern tools and information for negotiating such agreements.
However, collective agreements that are negotiated by Trade Unions and executed by Employers with these Trade Unions are not legally binding except they are enshrined in the individual employment contracts of each employee. This is in the light of the privity rule in the law of contract.
It is mandatory for an employer or employers to recognise a registered Trade Union and to allow its employees the constitutional right to elect whether or not to join any Trade Union in Nigeria.
Federation of Trade Unions & Affiliations
A group of Trade Unions may combine to form a Federation of Trade Unions provided that a majority of the members of the intending combined Federated Trade Union have agreed to the creation of the Federation of Trade Union. Despite this provision, Trade Unions representing junior employees cannot combine or be affiliated to senior employees Trade Unions.
The Nigerian Labour Congress ("NLC") is the statutorily recognised Federated Trade Union for junior employees while the Trade Unions Congress ("TUC") is the statutorily recognised Federated Trade Union for senior employees.
A Federation of Trade Unions may be registered by the Registrar for Trade Unions where:-
(1) Its main objective is to represent the interest of employees;
(2) Its members are twelve or more registered Trade Unions none of which is a member of another Federated Trade Union;
(3) It is established by a majority resolution of the national delegates conference of the trade unions concerned;
(4) Its name does not resemble nor conflict with the name of another federation of trade unions;
(5) It has adopted a constitution and or rules which is/are in accordance with the first schedule to the Trade Unions Act.
A critical objective for the establishment of a Federated Trade Union is for such federation to, among other things and subject to its Rules or Constitution, collect and disseminate to its members information and advice on labour relations, economic and social matters, or such other connected fields or matters; in addition to giving advice, encouragement and financial assistance to any of its members in need of such assistance.
Rendering of Accounts and Returns by Trade Unions
Every registered Trade Union in Nigeria is statutorily required to prepare and have certified by a licensed Auditor the Trade Union's Statement of Accounts and Returns which must be filed at the office of the Registrar of Trade Unions on or before the 1st day of June of each year.
Every member of a Trade Union is entitled to receive free of charge, the audited returns and statement of accounts that is filed with the Registrar of Trade Unions, once a request is made by such a member to his or her Trade Union. Failure to file or furnish such an audited account, with returns, is an offence by the Trade Union and every official of the Trade Union.
Peaceful Picketing or Persuasion
Section 43 of the Trade Unions Act (as amended) makes it lawful for a person or group of persons, acting on their own behalf or on the behalf of a Trade Union or a registered Federation of Trade Unions, or on behalf of an individual employer or firm, in contemplation of or in furtherance of a trade dispute to attend at or near a house or place where another person reside or works or carries on business or happens to be so present, if they so attend merely for the purpose of peacefully obtaining or communicating information or of peacefully persuading any person that is at work to abstain from working in furtherance of such a trade dispute. This exercise is more commonly known as the right to peaceful picketing or persuasion.
The right to a strike action or picketing or peaceful persuasion in the premises of an employer in furtherance of a trade dispute is guaranteed under the Trade Unions Act (as amended) and under the 1999 Constitution of the Federal Republic of Nigeria (as amended). Employees engaged in any of these activities cannot, subject to the exceptions stated in the following paragraphs, be charged with any offence arising from such peaceful exercise of their constitutional rights.
Exceptions to Peaceful Picketing and Strike Action
However, no person is allowed to subject another person or group of persons to any form or kind of intimidation, constraint or restriction of the latter's right to free movement in the course of the peaceful picketing or persuasion in another's premises.
Also, no Trade Union or registered Federation of Trade Unions or any member thereof shall in the course of any peaceful picketing or persuasion, or strike action compel any person who is not a member of its Union to join in such picketing, persuasion or strike action, in any premises, institution or highway of any kind, for the purpose of giving effect to the picketing or strike action.
Exemption from Actionable Torts in a Trade Dispute
Any action done by a person in the contemplation of or in the furtherance of a trade or labour dispute is not actionable in a Court of Law in Nigeria. Such actions include the inducement of or the persuasion or threat of persecution of Trade Union members to breach or break their contracts of employment and interference with an employer's trade or business, or the employment of some other party. Any actions outside the latter stated exemptions to the general protection to trade union activism could be actionable in a court of law.
Trade Unions and the Companies and Allied Matters Act
The provision of the Companies and Allied Matters Act do not apply to the activities of any Trade Unions, or to any Federation of Trade Unions in Nigeria. This exclusion includes the registration of a Trade Union under part C of the Companies and Allied Matters Act as such registration is declared null and void by Section 45 of the Trade Unions Act (as amended).
Jurisdiction
The jurisdiction to try offences committed under the Trade Unions Act (as amended) was conferred on a Magistrate Court having the jurisdiction in the area where the registered office of the Trade Union concerned is registered or where the offending party resides.
However, the Constitution of the Federal Republic of Nigeria (Third Alteration) Act, 2010 now confers on the National Industrial Court of Nigeria the status of a superior Court of Record with exclusive jurisdiction to entertain all labour, employment, trade unions, industrial relations related matters, with other matters connected therewith, that arise from the workplace, the conditions of service, welfare of employees, etc. You can visit the National Industrial Court's website, www.nicn.gov.ng for more information.
Conclusion
Trade Unions in Nigeria, with the Federated Unions for Trade Unions in Nigeria, have failed to enlighten their members, employers, with other stakeholders, on the twenty-first century benefits of Trade Unions to employers and employees via Trade Unions, and the necessity for these stakeholders to enter into loose partnerships to the benefit of all concerned.
The Trade Unions have also failed to build twenty-first century tools and capacity to enlighten their own members and economically protect them whenever their employment interest are threatened or jeopardised.
The Trade Unions have also failed to find a more effective negotiation tool other than threats of or actual strike or industrial actions which have failed due to the very weak economic structures in Nigeria and the lack of financial support to the employees during the period of the strike actions. Also, the percentage of employees or employers who are members of Trade Unions have diminished considerably in the last few years when compared to the entire workforce in the country.
The democratic structures in the various Trade Unions in Nigeria are undermined by the very poor governance and electioneering structures in the larger society. The labour movement continues to find it very difficult to show a good governance example as they had in the past due to their poor structures.
The none enforcement of the provisions of the Trade Unions Act with the fundamental human rights provisions in the Constitution of the Federal Republic of Nigeria, by the Trade Unions will continue to improvise the Nigerian workforce.
Curiously also are the paltry penalties for breaches of the express provisions of the Trade Unions Act (as amended). These paltry penalties appear to be designed to encourage Employers' breach and disobedience that compliance with the present day applicable Law.
A holistic amendment of the Trade Unions Act (as amended) to meet present-day realities is therefore fundamental to the development of the Nigerian economy.
DISCLAIMER NOTICE. This Legal Alert is a free educational material, for your general information and enlightenment purposes ONLY. This Alert, by itself, does not create a Client/Attorney relationship between yourself and our Law Firm. Recipients are therefore advised to seek professional legal advice and counselling to their specific situations when they do arise. Questions, comments, criticisms, suggestions, new ideas, contributions, etc are always welcomed with many thanks.
This Legal Alert is protected by Intellectual Property Law and Regulations. It may however be shared with other parties provided that our Authorship is always acknowledged and this Disclaimer Notice is attached
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This Alert and others produced by us are provided without any charge to you and without the creation of a client-attorney relationship. You can always subscribe to it, on behalf of other interested persons from whom you have their permission, by sending to us a one line e-mail with the words "Subscribe – Legal Alerts" followed by the desired email address.
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Legal Alert – May 2011 – Electricity Licenses & Tariffs – Law & Regulations
 
In this Issue:-
1. Legal Alert – May 2011 – Electricity Licenses and Tariffs – Law and Regulations
2. Disclaimer
3. Subscribe & Unsubscribe
Introduction
The Electric Power Sector Reform Act, 2004 ("the EPSRA") in its preamble or Explanatory Memorandum, states that the EPSRA "...... provides for the formation of companies to take over the functions, assets, liabilities and staff of the National Electric Power Authority, develop competitive electricity markets, establish the Nigeria Electricity Regulatory Commission; provide for the licensing and regulation of the generation, transmission, distribution and supply of electricity; enforce such matters as performance standards, consumer rights and obligations and provide for the determination of tariffs."
The EPSRA has not being able to achieve, on the average, its preliminary objectives. Power generation, transmission, distribution and tariff regulation are still at dismal levels. Most contentious is the methodology for computing electricity consumption in Nigeria and charging the appropriate tariff for the electricity consumed on a balanced, commercially viable basis. Another related contentious matter is the tariff to be charged for privately generated electricity in private estates in Nigeria, on a commercial basis, due to poor public-sector generated electricity.
This Legal Alert will practically examine the above critical issues as they relate to sustainable electricity supply and investment in Nigeria.
Electricity Licensing
Section 62 of the EPSRA provides that only persons duly licensed by the Nigeria Electricity Regulatory Commission ("NERC") or persons deemed to have being issued with such a license under Section 98(2) – i.e. licenses issued before enactment of EPSRA and the unbundling of NEPA – can construct, own or operate, or in any way be engaged in the business of:-
(a) Electricity generation, excluding captive generation;
(b) Electricity transmission;
(c) System operation;
(d) Electricity distribution; or
(e) Trading in electricity.
The second exemption to the mandatory licensing requirement above stated is where a person constructs, owns or operates an undertaken that generates electricity that does not exceed 1 megawatt ("MV") in aggregate at one site; or where a person or an undertaking distributes electricity with a capacity not exceeding 100 kilowatts ("KW") in aggregate at a site; or in such other instances as the NERC determines, in the public interest, that an operating license will not be required for the electricity activity.
Electricity Tariffs
The Nigeria Electricity Regulatory Commission ("NERC") is authorised by law to create the methodologies that this Regulatory Commission will adopt for regulating electricity tariffs/prices resulting from electricity generation and trading, in addition to electricity transmission, distribution and system operations, in respect of which licenses are required as explained above.
The tariff methodologies to be adopted by NERC must incorporate the following factors:-
(a) Allow a licensee to recover its full operating costs and a reasonable return on the capital invested in the electricity enterprise;
(b) Provide incentives for the continued improvement of the quality of the electricity services provided;
(c) Provide incentives for the continued improvement of the technical and economic efficiency with which the electricity services are provided;
(d) Give to consumers information and data regarding the costs of the electricity generated;
(e) Avoid undue discrimination between consumers and consumer categories; and
(f) Phase out or substantially reduce cross subsidies.
NERC is authorised by the EPSR Act to, in establishing the tariff methodologies, differentiate among electricity consumers on the basis of differences in the total electricity consumed, the time periods that the electricity is consumed, load factors, power factors, voltage levels, location within the country and such other criteria that may affect the costs of providing electricity services and allow a lifeline tariff for some consumers.
The NERC is also required to publish a tariff methodology or any change in an existing tariff methodology that the Commission intends to approve and enforce. Objections or representations received from interested consumers or consumer groups, licensees and other electricity stakeholders must be considered by NERC before any tariff methodology is approved and enforced.
In addition to the above statutory requirements, all electricity licensees are required to keep in their offices a current copy of the tariff methodology applicable to that licensee's business and provide a free copy to any person that request for the tariff methodology during normal working hours.
Licensees are barred from transferring to the consumers any fines or penalties imposed in accordance with the EPSRA. There are Fines and terms of imprisonment, if convicted, where the tariff methodology duly approved are not followed or the consumer protection measures are not adhered to by a Licensee.
Case Law on Electricity Licensing and Tariffs
Billing for the electricity actually consumed, and adhering to the approved electricity tariffs, have lead to many disputes due to the disconnect between electricity regulations vis-à-vis the market forces of demand and supply in the electricity sector in Nigeria. An examination of some of the litigation in this subject area will provide some further enlightenment on the urgent need for practical electricity reforms.
Order No. NERC/H/061 – Funke Adekoya, SAN v. VGC Management & Maintenance Co. Limited & Eko Electricity Distribution Company.
The petitioner in this case challenged the legality of the power supply arrangement within Victoria Garden City Estate ("VGC Estate") wherein the 1st Respondent funded the design, construction and commissioning of a 15MVA (33/11kv) injection sub-station. The Nigeria Electricity Regulatory Commission ("NERC") held on 25th August 2008 that the trading arrangements in VGC Estate contravened Sections 62(1) and 100 of the EPSRA which requires that vendors in all aspects of electricity generation, distribution and tariff must possess a valid license duly issued by NERC in accordance with the EPSRA. The only exception to this license rule is where the electricity distribution capacity is less than 100kw in a designated site.
NERC also held that the Respondents cannot increase the electricity tariffs payable by the residents of VGC Estate as all the parties are under a legal obligation to abide by the NERC prior approved electricity tariffs or rates.
In another matter, Petadis Enterprise v. HFP Properties Limited, Case No. NERC/ 10/0011/08, the petitioner complained about the power supply arrangement whereby electricity was sold to the residents at Ikota Shopping Complex, by the Respondents, at rates above those approved. The Electricity Regulator held that pursuant to Sections 62, 67 and 69(1) of the EPSRA 2004, and following the Commission's decision in the above cited matter, the electricity distribution arrangement at Ikota Shopping Complex is illegal in the absence of the Respondents applying for and obtaining a NERC license for power generation in excess of IMW in the aggregate at one site. The Appeal against this decision failed as NERC held, while determining the appeal, that as a creation of statute and as the Regulator of the Electricity Industry, it must comply strictly with the provisions of the Electricity Power Sector Reform Act, 2004 (''EPSRA'') which prohibits any person, without a valid license issued by NERC, engaging in the business of electricity generation except where such electricity generation is below 1MW at a site, or where the electricity distribution takes place its capacity is below 100KW in aggregate at a site. Trading in electricity generally also requires a license subject to the exemptions mentioned above.
Soft copies of the above decisions can be found on the NERC website www.nercng.org
Conclusion:
The inability of the Nigerian Government and the Nigeria Electricity Regulatory Commission to privatise the different aspects of electricity businesses in Nigeria in accordance with the provisions of the Electricity Power Sector Reform Act, 2004 continues to inhibit and discourage private investment in the electricity sector which has in turn retarded development in other facets of life. For example, the unbundled entities are not functioning as commercial enterprises without government interference, thus resulting in very poor corporate governance, and very poor service delivery.
Also, the tariff regime, from metering to a tariff methodology, is not transparent to encourage consumer voluntary compliance or private sector increased investment. Electricity consumers continue to receive and pay for estimated electricity bills without their electricity metres being read by the electricity distribution companies.
Ultimately, the mustering of the political will to adhere to/implement the provisions of the Electricity Power Sector Reform Act will attract the much required direct local and foreign investment to the electricity industry in Nigeria.
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