Osayaba Giwa Osagie
A lawyer of over 26 years experience, Osayaba Giwa-Osagie’s area of expertise is Mergers and Acquisition where he advises multinational companies on M & As, strategic restructuring and also exit strategies. He also specialises in Aviation Law where he represents an enviable list of top tier international airlines.
His interest in transactional work was spurred during the four years he spent cutting his teeth in the legal profession under one of the most prominent lawyers of that period, Chief Abayomi Sogbesan, SAN. There, transactional work was often passed to the young Osayaba, whilst the other lawyers in chambers focussed on litigation.
He subsequently left Chief Sogbesan’s chambers to found his own law firm, Giwa Osagie and Co., some 22 years ago where his career very quickly took interesting turns. For instance, in the early ‘90s he acted for the Securities and Exchange Commission in their prosecution against Umana of the famous Wonderbank case. The case was eventually settled out of court and SEC recovered over N50m from Umana.
Giwa-Osagie and Co. it was which also in the early ‘90s helped establish the superiority of SEC over the Nigerian Stock Exchange on all matters regarding capital markets. Hitherto, Brokers had traded on the floor of the Nigerian Stock Exchange. The firm went to court to restrain them from carrying out capital market activities including trading on the floor of the Stock Exchange without registering with the Securities and Exchange Commission.
Currently, Osayaba is back to his first love, litigation, which he happily combines with transactional work.
JUDE IGBANOI And KUNLE OGUNFUYI met up with him last week at his offices in Lagos where he spoke about why it is absolutely important for lawyers to specialise. He also spoke about the privatisation of the power sector, the contentious PIB and other topical issues…
After what seemed an interminable process, the Nigerian power sector has finally been deregulated and privatised. How would you assess the legal regime and the long and tortuous process that finally culminated in the unbundling of PHCN (NEPA)?
I think the process had taken a very long time. But it has been extremely thorough and starting from the passage of the Electric Power Sector Reform Act in 2005, a good number of steps had been taken. I would say that at the end of the day, we have been able to get a piece of legislation that to a large extent is very certain. As a result of that, you would observe that 10 companies finally scaled the hurdles recently. They have been cleared to take over the generating companies.
It’s been tedious, it’s been long, but with the Bureau of Public Enterprises and other foreign international agencies, like the World Bank, we have been able to ensure that we had a process that was transparent, a process where the rules were stated in advance and the bidders were given the opportunity to make suggestions, look at the transaction documents and make necessary comments. By and large it’s been a transparent process.
At the time it started, there was apprehension that Nigeria didn’t have enough lawyers skilled in the area of privatisation. Foreign solicitors were being flaunted by the Bureau of Public Enterprises at the time, even in the face of protests by Nigerian lawyers. Under the circumstances would you say that the process met international best practices in your view?
I would say with all confidence that it met international best practices. I would also admit that at the commencement of the process it was clear that we hadn’t gone through such before. So, there was a need for us to work with experienced lawyers, lawyers that had expertise in power related transactions.
It’s not as if Nigerian lawyers were not capable. What Nigerian lawyers needed to do was to step back a little, do their homework and research, go through a list of transaction documents that would be required in transactions of this magnitude and be able to advise their clients accordingly as the process went along.
You would notice that in transactions of this nature, it’s fundamental that there should be power purchase agreements, implementation agreements, guaranties, performance bonds, financing agreements, insurance contracts, concession agreements and Engineering Procurement Construction contracts. Only experienced transaction lawyers who had gone through similar processes before could provide these. No man is an island, if Nigerian lawyers needed to consult with some foreign lawyers in certain related areas, it didn’t mean that we were not competent.
From that experience, would you say the average Nigerian lawyer is now well positioned to handle such transactions? Was the experience of any direct benefit to Nigerian lawyers?
Oh yes, the experience has been quite beneficial to Nigerian lawyers in many ways. In transactions of this nature lawyers that would be involved are lawyers that work in commercial law firms. These are lawyers who have the experience and international exposure. These are lawyers who have experience in Merger and Acquisition work, oil and gas and most importantly it’s not an area of 5,000 lawyers. It’s probably a market for about 100 lawyers at most. These are skilled lawyers.
What tends to happen is that in commercial transactions there are certain issues that are common. Issues that are fundamental to the successful implementation of whatever you want to do.
I would say that if you have not worked in major international transactions and all you spend your time on is purely litigation, then you must be careful before you step into these transactions.
Of the 54 investors that showed interest in the DISCOs in Nigeria, the 10 that eventually scaled the last hurdle of the National Council of Privatisation appeared to be mostly owned by retired senior government functionaries including retired top military officers and former heads of state. What does this say about the entire exercise?
I haven’t seen the details of the shareholders of those companies. It is important that one looks at the details of the shareholders to actually know if these allegations are true. But I know for a certainty that there are one or two former heads of state involved in those companies.
Honestly, I don’t think that should disqualify them from participating or being members of a company that won a bid. For me the important thing is that the structure and composition of the companies should be broad enough to contain individuals who have experience in the business sectors, individuals with experience in the legal sector and such individuals should be able to add value and come up with a team that would meet the expectations of the government and the public.
I must add that at the end of the day, these companies are going to present proposals that are bankable. So, if your proposals are deficient because you don’t have the right people on your board or you have not instructed the right advisers, then you’ll have problems.
Also, transactions of this nature require a lot of money. You need deep pockets. You need to secure the confidence of international banking institutions that you’ll meet sooner or later for your bridging loans. There must therefore be a strong and competent team to get these done at the end of the day. So, if that team happens to have an ex-head of state or a former military leader, that on the face of it may not be a disadvantage so long as they allow the technical teams do their work. That is all that is important.
What normally happens is that every bidder is supposed to send in their technical proposals. The BPE and the government would like to know whether members of your consortium have any previous experience in that industry. If it’s a generating company, if it’s a transmission company, what have they done in other parts of the world? What is their track record? That is key.
The way it is structured, you have different companies coming together to form Special Purpose Vehicles. Within such companies you have shareholders and those shareholders will represent different interest groups with different skills. You might probably have a company that is really going to do the technical work and that company must be a first rate company. Such company must have a good track record and it must be a company that can deliver. Those are the considerations. So, if there is a former head of state in such a company, his role might be just to be the face of the company engaging with the authorities - that is also very important. We must therefore have different people with different skills playing different roles in those companies. Nobody will bring you into a team if you are not going to add any value, whether you are former head of state or not.
What is your view on some of the speculations that some of these DICSOs that finally won the bids may have fronted for some foreign interests?
I am not in a position to ascertain whether or not this happened although I also heard it. But in matters of this nature, in a bid process, you are expected to disclose the identities of the principals. Each of these principals will be analysed with their technical records. They must submit their financial statements and they must also give details of their shareholders and directors, including their Curricula Vitae. I really don’t see any reason why any group would front for another.
These are major transactions and what you tend to have is that there may be a major promoter promoting the project. He sits down and works with a consultant, he will come up with a list of individuals and companies that he believes will be able to participate actively in achieving the desired goal.
In anything we do in this country there are always these kinds of speculations. It is also possible that some may have fronted, but the BPE assured everyone that the exercise was very rigorous, thorough and detailed.
We must also realise that projects of this nature are long term. It may take many years before they really start making any money. It’s not just a question of selling a product. It’s not like going to China, buy a product, add 300% margin and make your profit. These are long term projects that require long financial arrangements.
For instance some of the equipments required in these projects have long life spans. Some equipments manufactured by General Electric for instance have life spans of over 50 years. Any player in the power sector should be wise enough to know that these are long term projects with huge long term investments.
Some state governors raised issues over the sale of these DISCOs. The Delta State Governor for instance and some northern governors seriously kicked against some of the transactions, alleging foul play. Do you see any connection between their grievances and the sudden removal of the Director General of BPE?
The government has not told us why Ms. Bolanle Onagoruwa, the DG of BPE was removed. We need to know for certain whether the government was acting on the resolution of the National Assembly calling for her removal. Until we know all these, I don’t think it would be safe to conclude that she was removed based on the complaints of the Delta State Governor or some governors in the north.
If there were aspects of the process that these governors were not happy about, why did they have to wait till now to come up with such complaints? This process had taken over one year and they had opportunities to make comments. They also had the opportunity to meet with the BPE, members of the Nigerian Electricity Regulatory Commission and the Minister of Power. Why didn’t they raise those complaints at that stage? We are therefore not really sure why Ms. Onagoruwa was removed.
There has always been a cat and mouse relationship between the regulator and operators in any particular sector of the Nigerian economy. Now that the unbundling and privatisation is successfully completed in the power sector, how will the relationship between NERC and the successful bid winners play out, given the fact that the players hardly love the regulator and vice-versa?
In order to ensure that a good relationship exists between NERC and all stakeholders in the power sector, it is fundamental that all parties meet on a regular basis; this is in the interest of Nigerians. You will recall that this process has been going on for a very long time. The World Bank, BPE, NERC, Power Ministry have held road-shows in different countries of the world. I know they went to London, Johannesburg, New York and many other major cities around the world, telling people about Nigerian power sector.
The operators are therefore aware of what would be required of them. The regulators on their own part know what best practices are all over the world. The important thing is that they remain independent in whatever they are doing. There shouldn’t be any problem going forward.
Today, one of the greatest worries by local and foreign investors is the security situation in Nigeria. When your foreign clients and potential investors raise questions and worries over the security situation in Nigeria, especially with the recent spate of bombings in the North and restiveness in the Niger-Delta, how do you advise them?
My honest advice to them is that I believe that it’s a temporary problem. Like any other problem, it will come and go. These security problems will be resolved with time. You’ll recall there was a time we had major security issues in the Niger-Delta region where oil workers were being kidnapped and even killed. But the government introduced the amnesty programme and that has been resolved satisfactorily.
What we tell our foreign clients is that it’s a temporary problem that will be resolved in no time. But at the same time we tell them to be very careful if they were thinking of travelling to such areas prone to attacks by Boko Haram. We tell them, ‘Be very diligent when you are travelling, have the necessary support and ensure you get enough coverage from the police.’ We tell them to put their travel plans on hold if we feel a particular area is unsafe for the time being.
However, if you look at Nigeria as a whole, the area that is affected by this terrorism is actually less than 20% of the entire landmass of Nigeria. These areas are identifiable and we believe that with the steps currently being taken by the government and negotiations going on, the issue of terrorism in Nigeria will soon be a thing of the past.
The aviation sector is in a state of near collapse, with just a handful of functional airlines. A number of airlines have folded up. Looking at the laws regulating our aviation sector what do you think needs to be done to remedy the situation?
We work for two major international carriers and I understand the challenges in that sector spanning over 20 years. The starting point is that we must understand that aviation is not a lucrative business. The profit margins are very thin! The international conventions and laws governing aviation worldwide are very stringent in terms of the number of repairs and the need to maintain international standards all the time.
There are C-checks and there are D-checks. When these airplanes come up for these checks, they must be taken to facilities where the checks are carried out and these cost a lot of money. When the tyres are to be replaced after a certain number of takeoffs and landings, they must be replaced; these are very expensive! These are international issues, not local issues.
People must realise that the industry is capital intensive. Recently, South African Airways for the current year declared a loss. It was the Government of the Republic of South African that had to bail them out! With all their experience and running what appears to be an efficient air service, they are still running at a loss.
There are similar stories all over the world where many airlines have either folded up or merged. In Nigeria if we can have four solid airlines that can offer quality service across the country, it would be better for us. At the same time the regulatory authorities should not be too hard on the airlines, especially when they are asking for marginal increase or upward reviews in fares. The fares they are charging must be able to meet their running costs and they must be allowed to make reasonable profits.
Most importantly, we must realise that travelling by air seems to be the most reliable means of transportation in the country. But what are we doing about the other sectors? If we are doing anything, then we probably need to do more. The rail system, I know the government has sunk in a lot of money, but we need to see the railways working. What about traveling by sea? How good are our seaports? Can one go by sea from Lagos to Port Harcourt, Calabar or Warri? If we can’t, why not?
Then we need to have good and motorable roads linking the main cities in the country. If we have a good railway system for instance, all the trucks that are currently destroying our roads at the moment will be off the roads. Most goods will then be transported by rail. This is what happens in most other countries of the world. Let the government develop other means of transportation in Nigeria and that way will reduce the dependency on air transportation.
In other countries people travel by bus or coach and they are reliable and safe. There are no issues of robberies. We must have a 24-hour rail system across the country and we must also work on security to ensure that travellers arrive their destinations safely.
How do you feel that today the nation doesn’t have any functional national carrier like most other African countries including our smaller neighbours? In those days Nigeria Airways used to be the pride of the country and the continent.
It is sad, very sad! I think the government should take necessary steps to ensure that something is done about this. However, if such national carrier is 100% owned by the government how would you prevent the fate that befell Nigeria Airways from befalling that new national carrier? That is a critical issue. Should we have a public-private initiative, like the case of Air Nigeria? Should it be 100% owned by the government? Judging by past history, I don’t think 100% government ownership would work.
I would support an initiative between the government and private investors, local and international, but we must get the necessary designation and enabling laws so that it can truly function as a national carrier.
How do you assess the handling of the recent face-off between Lufthansa Airline and the Aviation Minister? What lessons are there to be learned? In some quarters the Aviation Minister was accused of highhandedness in handling that affair.
To be honest I don’t have the full details of what really transpired. It would not be safe for me to comment on that. Having said that, if there are regulatory issues and there are matters that border on discretion or matters that are cast in stone, then the laws must apply.
I think it’s still unfolding. If there are compliance issues the Minister must be as firm as she can be, because that is what happens all over the world.
What are your thoughts on the Petroleum Industry Bill that has also remained at the National Assembly for years now and is yet to be passed? It has attracted so many criticisms about its content. Now, northern governors are said to be vehemently against its passage for whatever reasons. What is the way round this?
I just came back from the National Economic Summit in Abuja and I was at as session where the Minister of Petroleum made a presentation. There was a representative of the Speaker of the House of Representatives present. There was the Managing Director of Mobil and other major players in the sector.
My take is that the PIB is a fundamental law which must be passed. However, this is a piece of legislation which seeks to bring fundamental changes into how oil and gas business is carried on in the country. The law is also coming up at a time where we have had other laws and regulations that have been in place for over 50 years, so there is bound to be a lot of resistance to this law being passed. But we have received assurance from the Minister of Petroleum that the law will be passed.
What is key in my view is that we must get the fiscal regime right. In order to do this, we need to consider where we are at the moment. We must ask ourselves what happens in other parts of the world. How have other OPEC members regulated their own oil industry? Let’s take a cue from that. If it’s convenient for Shell to operate in other parts of the world using a particular fiscal regime, then they must be willing to operate using that regime in Nigeria.
We must also be careful that we don’t enact laws that will discourage international foreign investors. We must not allow laws that are repugnant to international practices. Those same laws must take into consideration the peculiarity of the Nigerian environment. One of those peculiarities is the issue of security. It’s not in every country that you have kidnapping of oil workers. The law must also consider the issue of cost of doing business in Nigeria. By and large we must be able to meet ourselves somewhere in the middle, but the point must be made that the fiscal regime at the moment is not in the best interest of the country. That is very clear to all the players in the industry; but in putting in place a new regime, we must be careful not to go to the other extreme.
Can you marry that with the Local Content Act? How has the Act fared since its passage?
I don’t think that people have major issues with the Local Content Act. Yes, I am aware that people have advocated that certain aspects of it may need to be reviewed. However, the principle behind the passage of the Act is a very sound one. We need to check capital flight. We need to empower Nigerians to be able to participate fully in the oil industry. We also need to encourage foreign companies to set up shop in Nigeria; but in doing all these, it shouldn’t be overnight. Foreign companies must be given time to adjust. I think the Local Content Board already have a waiver window which enables companies have a period of time to enable comply with the law.
A lot has been achieved since the Act was passed. Yes, there are a few provisions which are not very clear and these need to be looked at closely. But it’s a good piece of legislation which must not be repealed. It’s a detailed piece of legislation and it’s in the overall interest of the country.
A worrisome trend has been observed in legal practice in Nigeria. There have been complaints than some law firms go to corporate organisations to undercut other law firms in billing and fees. This seems to breed bad blood in the profession. How can this trend be addressed?
The starting point is to understand that the quality of legal service you get is dependent on the quality of the law firm you are using for that particular work. If you get a very cheap law firm, the quality of work may not be very good.
However we live in a very competitive environment. In fixing fees therefore you have to be careful. Your charges are a reflection of your level of experience in the legal profession and your expertise in that particular field. How complicated is that transaction? What is the likely duration? These are some of the things that should be taken into account when fixing fees.
Generally, companies invite bids and get proposals from law firms. If one law firm sends a proposal for N100 million for a job and another sends a proposal for N20 million for the same job, the company should have to decide which of the firms will able to do a good job within a given time frame. They must also look at the partners in that firm and their level of experience and competence.
If that hurdle is crossed, then the issue of fees would come in. But in cases where you have such wide gaps in fees, those law firms charging so low may not be able to deliver. They may not have all the experience and may not have considered all the necessary issues in the matter.
Does that not border on professional misconduct or malpractice? Does that not raise ethical issues?
I don’t think so. Companies are free to negotiate with as many law firms as they may wish to on any particular transaction. Secondly, an agreement has to be reached and a letter of engagement signed and the scope of work, duration and fees to be charged. When that is done, a situation cannot arise where that same company will go ahead and negotiate with another law firm with a view to undercutting.
What can likely happen is that a company may feel that they have been overcharged in a particular transaction. Next time they may not engage that law firm. What they do in such situations is that they will simply ask their General Counsel to invite more law firms to submit proposals and they will consider all and decide which one to use.
What tends to happen which is also not good is that you may find a law firm working with a particular company, the terms are very clear and a letter of engagement has been signed, then another law firm may find out that your law firm has been given a particular brief. That law firm goes behind your back to tell the company that they are capable of doing a better job and charging lower fees. Some go as far as making derogatory remarks about the other law firm. We now have so many of such cases and it should be discouraged! Lawyers must not be seen as touting! Lawyers must conduct themselves in a dignified manner at all times. This is a conservative profession where integrity is very important, and every law firm should carve a niche for itself and identify its market rather than making derogatory remarks about another law firm or engaging in sharp practices.
What is your view about the recent unprecedented move by the Federal Government to remove Value Added Tax from all capital market transactions? It is still being commended.
I think the context should also be examined very closely. The Coordinating Minister for the Economy and Finance took that decision as a result of the depression in the capital market. It was taken as a result of the very poor level of activity taking place in the capital market.
That measure was taken to ensure that those stock brokers who had their licenses suspended needed to be brought back into the market. Some of them lost huge sums of money because of marginal loans. There is the need to bring them back into the market. Those measures were taken to revive the capital market. The industries that are doing well need to be resuscitated.
Your law firm is listed in Lex Africa. What does it entail?
Our law firm is over 24 years in existence and we have tried to maintain standards. The Lex Africa Board which is based in South Africa did a survey of law firms and after their due diligence they considered us deserving to be brought on board Lex Africa and we have been there for over 12 years. Lex Africa only accommodates one member per country and they are firms that have distinguished themselves in terms of reputation, competence and integrity.