Fed Govt, Bayelsa, Akwa Ibom, Rivers to raise panel within 90 days

ALL revenue lost to oil exploring and exploiting companies due to wrong profit sharing formula under the Production Sharing Contracts (PSC) since August 2003, the Supreme Court ordered yesterday.

It directed the Federal Government to initiate moves to recover the funds from the oil giants.

The court’s seven-man panel, led by the Chief Justice of Nigeria (CJN), Justice Walter Onnoghen, gave the order in a consent judgment given yesterday in a suit filed by Rivers, Bayelsa and Akwa Ibom states against the Federal Government in 2016.

The states, who sued through their Attorneys-General, agreed to an amicable settlement, which was reduced to terms of settlement.

They filed the terms of settlement on April 6, 2018 and the apex court adopted it as its judgment.

The terms of settlement were signed by the Attorneys-General of the three states – the late Emmanuel Aguma (Rivers), Kemasuode Wogu (Bayelsa) and Uwemedimo Nwoko (Akwa Ibom) as well as the lead counsel for the AGF, Mr. Lucius Nwosu.

The Permanent Secretary of the Federal Ministry of Justice, Mr. Dayo Apata, signed as the witness.

By the agreement, the AGF is expected to work with the three states to “immediately set up a body and the necessary mechanism for recovery” of all the lost revenue since August 2003.”

The court directed that the AGF to, within 90 days, put in place the mechanism for the recovery of the lost revenue.

The three states which had jointly filed the suit marked SC.964/2016, in the names of their respective Attorneys-General, contended that the Federal Government had been short-changed of its supposed shares of an estimated earnings of $1,149,750,000,000, under the Production Sharing Contracts for the period between 2003 and 2015.

According to them, the huge loss suffered by the Federal Government is due to the failure of the minister of Petroleum Resources for over 15 years to activate the re-adjustment of the sharing formula (the PSC) of 60 per cent share of oil profits to the Federal Government and 40 per cent to the oil companies.

They argued that the Federal Government had suffered huge losses under the PSC because of non-compliance with Section 16(1) of the Deep Offshore and Inland Basin Production Sharing Contracts Act which was said to have come to effect since January 1, 1993.

The plaintiffs faulted Section 8(1)(f) of the Production Sharing Contracts between the Federal Government and the oil companies, which makes provision for the 60 to 40 per cent sharing agreement.

They stated that, under the Deep Offshore and Inland Basin Production Sharing Contracts (PSC) Act, there ought to be an upward re-adjustment of Federal Government’s share of oil profit “in a manner as to become economically beneficial to the Federal Government” whenever the price of crude oil exceeded $20 per barrel.

The states argued that the PSC which provides for the current sharing formula between the Federal Government and the oil companies could no longer be valid because the oil prices had since overshot the $20 per barrel.

When the case came up on November 14, 2017 Abubakar Malami (SAN), listed as the sole defendant, indicated his preparedness to explore an amicable settlement of the suit.

Following AGF’s request, the apex court adjourned to give room for the parties to negotiate.

Other parties in the suit were said to have met with the AGF in his office on March 20, 2018, and agreed to settle, and later came up with the agreement filed as terms of settlement on April 6, 2018.

With the agreement adopted by the court on Wednesday, the Federal Government has agreed to implement prayers (a) – (c) in the suit.

Prayer (a) is “a declaration that there is a statutory obligation imposed on the defendant (the AGF/FG) pursuant to Section 16(1) of the Deep Offshore and Inland Basin Production Sharing Contracts Act, Cap D3 Laws of the Federation of Nigeria 2004, to adjust the share of the Government of the Federation in the additional revenue accruing under the Production Sharing Contracts if the price of crude oil at any time exceeds twenty dollars ($20) per barrel in real terms to such extent that the Production Sharing Contracts shall be economically beneficial to the government of the Federation; and a fortiori the component Federating States of the Federal Republic of Nigeria especially the 1st, 2nd and 3rd plaintiffs.”

With regard to prayer (b), the court declared “that the failure of the defendant to accordingly adjust the share of the Government of the Federation in the additional revenue in the Production Sharing Contracts…” constitutes “a breach of the said Section 16(1) of the Deep Offshore and Inland Basin Production Sharing Contracts Act” and has affected the total revenues of the Federal Government and the states.

Prayer (c) is therefore, a consequential order of the apex court, “compelling the defendant to adjust the share of the Government of the Federation in the additional revenue under all the PSC in Nigeria’s oil industry within the Inland Basin and Deep Offshore areas as approved by the defendant from the respective times the price of crude oil exceeded twenty dollars ($20) per barrel in real terms and to calculate in arrears with effect from August 2003 and recover and pay immediately all outstanding statutory allocations due and payable to the plaintiffs arising from the said adjustments.”

By the agreement, parties agreed as follow:

“That reliefs (a) (b) and (c) in the Amended Originating Summons relating to the larger interest of the Federal Government of Nigeria and the entire citizenry of the Federal Republic of Nigeria and which therefore shall be diligently implemented.

“That the Hon. Attorney General of the Federation on behalf of the Defendant working jointly with the Plaintiffs hereby undertake to immediately set up a body and the necessary mechanism for recovery of all lost revenue accruing to the Federation Account arising from, associated with or pertaining to relief (C) above in the past and up till the date of full recovery and accruing in future or an acceptable instalmental payments thereof within ninety (90) days next from the date of execution of these presents or its being made judgment of this Honourable Court.

“That the solicitors of the plaintiff and or their nominee professional advisers shall be members of that body and necessary recovery mechanism set up by the Honourable Attorney General of the Federation in (b) above.

“That the cost of the recovery in clause b. iii (b) above shall be netted off and payable from the Gross recovered sums from time to time prior to placement of the net recoveries in the Federation Account.

“That the 13 per cent (per cent) derivation due to the plaintiffs shall be paid to them upon recovery in accordance with Section 162 of the 1999 Constitution as amended.”

Bayelsa State Governor Seriake Dickson described the verdict as victory for the littoral states, according to a statement by his Adviser on Media Relations Fidelis Soriwei.

According to him, even before the first offshore swamp oil well was discovered under the particular Act by the Nigeria AGIP Energy, the price of crude oil had exceeded $20 per barrel being used as a benchmark to share oil revenues in the state.

He stressed that in spite of the express agreement that shares from the oil revenue accruable to the Federal Government should be adjusted, the benchmark being used by the multinational oil firms has been static at 20 Dollars per Barrel to date.

The governor, who spoke on behalf of his Rivers and Akwa Ibom states’ colleagues, said that the judgment demonstrated “the primacy of the law in the socio-economic emancipation of the people of the Federal Republic of Nigeria through the instrumentality of the government and people of Bayelsa, Akwa Ibom and Rivers States.”

Dickson stated further that the implication of the judgment was increase in revenues accruable to the federating states under the extant revenue sharing formula.

He said: “We commend the Supreme Court of Nigeria for upholding the Rule of law. The courageous intervention of the Supreme Court in this case and other cases is what is needed to bring confidence to the long-suffering people and communities of the Niger Delta and the country at large.

“This judgment shows clearly that the judiciary is ready and has the courage in deciding cases to uphold the rights of oppressed people.

“We call on other courts in the judicial system to rise to the occasion in order to give the assurance that oil majors and oil block owners operating in our communities will respect the laws of the land.”