Supreme Court Voids FG’s Acquisition of OML 127

13 May 2012

Symbol of Justice

From Tobi Soniyi in Abuja

The Supreme Court has set aside the acquisition of 50 per cent stake by the federal government in the Oil Mining Licence (OML) 127 granted to Famfa Oil Nigeria Limited, a company which has renowned businesswoman, Mrs Folorunsho Alakija, as one of its shareholders.

In a unanimous judgement, the apex court held that the Minister of Petroleum Resources did not follow due process and the law in the forceful take- over of the 50 per cent interest in OML 127.

The court rejected the argument of the federal government that there was an agreement between it and the plaintiff (Famfa) allowing it (the government) to take up 50 per cent stake in the licence.

Justice Bode Rhodes-Vivour who delivered the judgement of the court said: “The agreement executed by the parties was done in clear violation of the provisions of paragraph 35 of the 1st Schedule to the Petroleum Act.

“It remains for all time a worthless piece of paper in the light of the long settled position of the law that parties even by consent cannot alter the provision of a statute.”

The court held that even though the federal government had a right to a participating interest of 50 per cent in OML 127, and indeed in any OML, it found that there was no compliance by the Minister of Petroleum Resources with the provisions of paragraph 35 of the 1st Schedule of the Petroleum Act.

The court consequently declared the acquisition by the federal government in OML127 illegal and unconstitutional because it offended section 44 of the constitution. Section 44 (1) of the constitution states. “No moveable property or any interest in an immoveable property shall be taken possession of compulsorily and no right over or interest in any such property shall be acquired compulsorily in any part of Nigeria except in the manner and for the prescribed by a law.”

The fact of the case as stated by the Supreme Court is that on the 5th of May 1993, the Respondent (Famfa Oil Nigeria Limited) applied for an Oil Prospecting Licence from the federal government. The respondent was successful. So it was issued OPL 2016. Later the OPL was converted to OML 127 after the company had discovered oil.

Clause 2 of the licence states that, “The licence is granted subject to the Petroleum Act 1969 and the regulations there under now in force or which may come into force during the continuance of this licence.”

On being given OPL 216, the respondent is to prospect for oil. This it did by entering into joint venture agreement with Star Deep Water Petroleum Limited and Petrobas.

Barely a month after OPL 216 was converted to OML 127, the federal government wrote to the company informing it of the decision to take over 50 per cent of the stake under the Back-in-Right Regulation of 2003.

The Supreme Court found as a fact that the company had invested thousands of United States dollars prospecting for oil.

The company further stated said that it exerted a lot of manpower and millions of United States dollars on the exploration of the field.

It said that it was not offered any compensation for the acquisition of the 50 per cent stake in the licence.

But dissatisfied with the decision of the federal government to forcefully take over 50 per cent stake from the licence, the company filed a suit at the Federal High Court in Abuja.

Among others reliefs, it asked the court to declare that the decision of government to take 50 per cent stake in the licence was illegal and unconstitutional.

It further asked the court to restrain government from taking the said 50 per cent stake. It claimed that the decision by government to take the stake was arbitrary and was not done in accordance with the due process. The company said that there ought to be a negotiation before government could take the 50 per cent stake.

But the federal government disagreed, saying it had the right to take the stake.

The Federal High Court agreed with the federal government. Upon further appeal to the Court of Appeal, the judgement of the High Court was set aside.

Government was dissatisfied and lodged an appeal to the Supreme Court which was dismissed.

SOURCE: ThisDay, 13 May 2012. http://www.thisdaylive.com/