S’Court Orders FG to Adjust Oil Proceeds Sharing Formula When Price Exceeds $20

Supreme Court

The Supreme Court in a landmark judgment wednesday ordered the federal government to adjust its share of proceeds from the sale of crude oil whenever the price exceeds $20 per barrel.

This, according to industry expert, means more money for the federation in its production sharing contract with its joint venture contract multinational oil companies partners, a development they said would translate to extra funds for states, particularly the littoral states.

The order, which was made in a ruling in a suit filed by the Attorneys-General of Rivers, Bayelsa and Akwa Ibom States, is a fall out of the terms of settlement between the Attorney General of the Federation (AGF) and the plaintiffs.

The seven-man panel of the Supreme Court, which included the Chief Justice of the Federation, Justice Walter Onnoghen, in a unanimous ruling, ordered that the 13 per cent derivation that is due to the oil producing states be paid upon recovery, in accordance with Section 162 of the 1999 Constitution (as amended).

The plaintiffs, the Attorneys-General of Akwa Ibom State, Mr Uwemedimo Nwoko; Bayelsa State, Mr. Wodu Kemasukde; and the Rivers State, Emmanuel Aguma (SAN), now deceased, had in November 2017 approached the court for interpretation of Section 16(1) of the Deep Offshore and Inland Basin Production Sharing Contract Act in suit number SC964/2016 filed on their behalf by Mr. Lucius Nwosu (SAN).

The section requires the federal government to adjust the shares of the revenue accruable to the federation whenever the price of crude oil exceeds $20 per barrel.

The plaintiffs asked the court to determine whether there is a statutory obligation imposed on the federal government pursuant to the section to adjust the share of the federal government in the additional revenue accruing under the various productions at any time the price of crude oil exceeds $20 per barrel.

The states also urged the court to declare that failure of the federal government to accordingly adjust the share of the government of the federation is a breach of the law.

However, the apex court in its ruling read by Justice John Inyang Okoro adopted the terms of amicable settlement between the AGF, and the Attorneys-General of Rivers, Bayelsa and Akwa Ibom States as its judgment in the matter.

According to the terms of settlement signed by the three states and the AGF, the cost of recovery shall be netted off and payable from the gross recovered sum from time to time, prior to placement of net recoveries in the Federation Account.

Also, the solicitors of the three states or their nominee professional advisers shall be members of the recovery body and necessary recovery mechanism.

While lead counsel, Nwosu, witnessed the signing on behalf of the plaintiffs, while the Solicitor General of the Federation and Permanent Secretary, Federal Ministry of Justice, Mr. Dayo Apata, witnessed for the AGF.

Meanwhile, the court has ordered counsel to the Lagos Chamber of Commerce, Mr. Babatunde Fagbohunlu (SAN), to pay N2 million to each plaintiff as penalty for filing a frivolous application in the matter.

Fagbohun had through an application as intervener applicant urged the court to dismiss the matter in the interest of the public.

He had argued that the reliefs sought by the three oil producing states would affect the entire business environment in the country.

However, the apex court justices unanimously disagreed with him on the grounds that the Lagos Chamber of Commerce, which he represented, had no locus standi to introduce a matter before the apex court.

“You cannot invite yourself as an amicus curie, and if the court did not see the need to have an amicus curie, you cannot impose yourself on the court,” the apex court held.

The court also ruled that intervener applicants’ motion had been over taken by events, as the court had already assumed jurisdiction on the matter.

The court further held, “The Intervener Applicant is not one of the parties that can invoke jurisdiction of the court. This application lacks merit and is hereby dismissed.

“The terms of settlement entered into by the parties be and is hereby made the judgment of this court. The intervener applicant shall pay a cost of N2 million to each counsel and the cost shall be borne personally by counsel to the intervener.”

It’s Victory for Rule of Law, Says Dickson

Reacting to the judgment, the Governor of Bayelsa State, Mr. Seriake Dickson, described it as a victory for the littoral states, indeed the Nigerian federation and the rule of law.

A statement by his Adviser on Media Relations, Mr. Fidelis Soriwei, said 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 per barrel to date.

The governor, who spoke on behalf of his counterparts from Rivers and Akwa Ibom States, said 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 governments 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 commended the Supreme Court for demonstrating the courage to uphold the rule of law in landmark verdicts required to rekindle the confidence of the deprived people and communities of the Niger Delta and indeed the Nigerian federation.

He said, “We commend the Supreme Court of Nigeria for upholding the rule of law. The courageous intervention of the 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.”

The governor called on President Muhammadu Buhari to direct the relevant agencies to ensure expeditious implementation of the judgment in the interest of the government and citizens of the country.

He assured the people of the Niger Delta and the Nigerian federation that the law could always be used to redress grievances rather than the recourse to self-help.

Source: Thisday

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