Court Restrains NPDC, NNPC from Terminating Agreement with Atlantic Energy

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  • Says arbitration agreement binding on parties

Davidson Iriekpen

A Federal High Court in Abuja has restrained the Nigerian Petroleum Development Company Limited (NPDC) and Nigerian National Petroleum Corporation (NNPC) from taking any step in terminating agreement they have with Atlantic Energy Drilling Concepts Nigeria Limited and Atlantic Energy Brass Development Limited owned by businessman, Jide Omokore, in respect of the Oil Mining Leases (OMLs) 26, 30, 44 and 42 (Forcados assets) and OMLs 60, 61, 62 and 63 Brass assets).

NPDC had abruptly terminated the agreements they entered with Atlantic Energy in respect of the Oil Mining Leases (OMLs) 26, 30, 44 and 42 (Forcados assets) and OMLs 60, 61, 62 and 63 (Brass assets) despite that the disputes were still pending before the arbitral tribunal.

Consequent upon this, the oil firms through their lawyers, Babatunde Fagbohunlu (SAN) and R. A. Lawal-Rabana SAN approached the court to challenge the arbitrary termination of the agreement without resorting to the contractual clause of arbitration in time of dispute as clearly stated in the contract.

In a judgment delivered by Justice Nnamdi Dimgba, he upheld the arbitration agreement contained in Article 22 of the Strategic Alliance Agreements (SAAs) entered into by the parties in the suit in respect of the Oil Mining Leases (OMLs) 26,30, 44 and 42 (Forcados assets) and OMLs 60,61,62 and 63 (Brass assets).

The judge held that the SAAs entered into by the applicants and respondents in the suit are still binding on the parties.

He consequently restrained the NPDC and NNPC from taking any step on the basis of the notices of termination dated June 2, 2016 and served on the applicants pending the inaugural sitting of the arbitral tribunal to be constituted pursuant to the provisions of Article 22 of the agreement.
Justice Dimgba however, said the restraining order would elapse on the day of the inaugural sitting of the tribunal or precisely at a period of 60 calendar days from the day of the judgment.

He said being an order to aide arbitration, it is to enable arbitral tribunal to seize the entire proceedings and to decide for itself if it wishes to grant any interim measures of protection or any orders at all as it is empowered to do under the Act and rules.

The judge faulted the respondents for not keeping to the terms of the SSAs which in Article 24.3 obliges them to issue 30 working days notice of remediation to the 1st applicant of which failure to remedy any identified default within which the set time will lead to the automatic termination of the agreements.

He said the notices given by the respondents to the applicants based on its exhibits T7 to T11 were not “30 working days” but “30 days” which are two different things
The judge ruled: “Although I have held that the jurisdiction on the substantive and procedural validity of the termination of the agreements resides with the arbitral tribunal and not with this court, I cannot close my eyes to the fact that even on the face of it, there are deep questions regarding the validity itself of the notices of termination on which the so-called completed act is anchored.

“The SSAs by Article 24.3 obliges the 1st respondent to issue 30 “working” days notice of any identified default within the set time will lead to automatic termination of the agreements. But the notices that were given on the face of the exhibit T7 to T11 are not 30 “working days’ notices. I believe these to be different things. It is possible that the arbitral tribunal may take a different view, which I seriously doubt.

“Indeed, it is noteworthy that while the parties in some parts of the agreement such as Article 22 used “30 days” to define some obligation, but in Article 24.3 on termination, they used “30 working days” to define the notice obligation, indicating that this was on purpose and not an accident.”

The judge while resolving the issues in favour of Atlantic Energy (applicant), stated that the 60 days period of limitation is adequate for it to take all necessary steps they have to take under Article 22 of the agreement to ensure the constitution and in turn, the inaugural sitting of the tribunal.

He said one thing he found troubling in the suit was the attitude and the inclination of the respondents (NPDC and NNPC) not to obey the terms of the agreement that they have signed to resolve by dispute regarding the interpretation and performance of the agreement by arbitration.
He stated that the notion of the rule of law does not only mean that the government and its agencies and officials should abide by the existing laws but also means that they must respect the terms of the contracts entered into by the government.

While submitting that it does not make any difference if such contracts were entered into by past personnel of government, the judge said government is a continuum and the idea of government as sovereign invites the construction that acts of government is binding on government irrespective of governmental manpower which can change from time to time.
Justice Dimgba submitted that if governments disregard the terms of the contracts they have signed because new personnel have come on board or because it is popular to do so, that will create uncertainty and compromise order, which will be dangerous for our political and economic stability.

He posited that the court as the guardian of stability and order in the economic and political space would have failed in its responsibility if it allows this to happen.
Lawyers to Atlantic Energy have consistently argued that the entire case was a breach of a commercial contract.