Protracted Litigations for the Soul of ALSCON

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Part of the factors investors consider when rating a country ready for foreign investment is whether they will have access to suitable mechanism for dispute resolution and country’s compliance with the rule of law. This factor has seriously been threatened in view of the continued defiance of the Bureau of Public Enterprises to obey the Supreme Court’s judgments ordering it to handover Aluminium Smelter Company of Nigeria to a Nigeria-American consortium, BFIGroup. Davidson Iriekpen writes

Three weeks have since passed since the Abuja Division of the Court of Appeal ordered a stay-of-execution of the committal order issued by the Federal High Court Abuja for the remand of the Director General of the Bureau of Public Enterprises (BPE), Alex Okoh, in prison custody, the BPE boss has still not yet complied with the order of the court by doing what it directed him to do.

Justice Anwuri Chikere had ordered that Okoh be remanded in prison custody for a minimum of 30 days for refusing to obey the July 6, 2012 judgment of the Supreme Court, which resolved the ownership controversy of the Aluminium Smelter Company of Nigeria (ALSCON) in favour of a Nigeria-American consortium, BFIGroup.

ALSCON, located at Ikot Abasi in Akwa Ibom State, has been the subject of an ownership struggle between UC RUSAL and Nigeria-American consortium, BFIGroup since the government privatised the firm in 2004. UC RUSAL was disqualified by the National Council on Privatisation (NCP) for violating bid guidelines. BFIG then later won the bid with an offer of $410 million.

But, BPE cancelled the outcome of the bid in controversial circumstances, triggering a bitter legal tussle that ended in July 6, 2012 with a unanimous ruling by the Supreme Court, ordering the BPE to rescind its decision to cancel the bid and hand over the company to BFIG. Despite multiple court rulings, the privatisation agency refused to respect the apex court’s order and transfer ownership of the firm to BFIG.

In April 2019, BFIG initiated contempt proceedings against the BPE and Okoh.

The judge ruled that the continued refusal to obey the Supreme Court order by BPE and Okoh was a fundamental violation of the rule of law, “which portrays the government as lawless.” Justice Chikere ordered that Okoh be remanded in prison for at least 30 days until he purges himself of the continued disobedience of the court and further contemptuous conduct.

But, following an appeal No. CA/A/117/M/2019, filed before the Appeal Court, a panel of three, consisting Justice S. J. Adah, Justice R. M. Abdulahi and Justice M. B. Idris in, on December 24, 2019, directed a stay of execution of the order pending the hearing and determination of the motion fixed for January 20, 2020. The restraining order read in part: “An order restraining the respondent, the Chief Registrar of the Federal High Court, Abuja, their servants, agents, law enforcement agents and persons acting for or on behalf of the respondent from enforcing, attempting to enforce arrest or imprisoning the 2nd Respondent/Applicant pursuant to the ruling/committal order of the Federal High Court, Abuja, Coram Chikere J. dated December 17, 2019 in the suit No: FHC/ABJ/CS/583/2004 BFI Group Corporation v BPE, pending the hearing and determination of the motion on notice filed by the appellants/applicants.”

Specifically, following the privatisation process, which culminated in the final bid for ALSCON held on June 14, 2004, BFIG had emerged the preferred bidder, after a Russian company, UC RUSAL, was disqualified by the National Council on Privatisation (NCP) for violating the bid guidelines. But the BPE later disqualified BFIG too, allegedly for failing to meet the deadline for the payment of $41 million, being 10 per cent of the $410 million offer for the plant. Instead, the Bureau re-invited UC RUSAL for fresh negotiations, despite the earlier disqualification of the company by the NCP.

BFIG had responded by approaching the court to declare a legal dispute, which dragged for more than eight years, culminating in the July 6, 2012 judgment by the Supreme Court.

In a unanimous ruling, the apex court declared as illegal, null and void the handing over of ALSCON to UC RUSAL by BPE on the basis of the agreement reached at their negotiations in 2006. The court declared BFIG, as the rightful winner of the bid for the ALSCON held in 2004, ousting the Russian group, UC RUSAL. It upheld the appeal by BFIG against the decision of BPE to disqualify it as the preferred bidder for ALSCON after winning with a superior $410million offer in 2004.

A unanimous judgment read by Justice John Fabiyi, said that by virtue of the fact that the company had fulfilled all conditions stipulated in the bid guidelines issued by the BPE and the NCP prior to the commencement of the process to privatise the aluminium plant, including the payment of a $1million cash bid bond, and was cleared to stand for the bid, which it won, it had a subsisting and valid contract that is binding. It therefore directed that BFIG recognised immediately as the authentic winner of the bid for the plant.

The court asked BPE to invite BFIG and conclude negotiations they began in 2004 to establish a mutually agreed share purchase agreement for execution. The order of the court also included a perpetual injunction restraining BPE and its agents from unilaterally terminating the contract to BFIG.

But, BPE ignored the order. THISDAY gathered that rather than invite BFIG to open negotiations based on the order of the apex court, BPE issued a controversial offer letter dated January 29, 2013 entitled: “Offer to Purchase 77.5% shares of the aluminium shelter company of Nigeria, ALSCON,” whatever that meant.

The letter was accompanied by a 16-page Share Purchase Agreement (SPA), dated May 20, 2004, for execution by BFIG, rather than the 58-page agreement transmitted to it (BFIG) on October 8, 2012 for review and approval.

That agreement had captured detailed issues jointly negotiated with RUSAL in 2004 and later executed by the Russians on February 3, 2006 after ALSCON was transferred to them by BPE.

BFIG on receiving the letter, wrote to BPE seeking clarifications on the discrepancy on the unilateral “invitation to acquire aluminium shelter”, instead of the aluminium smelter it did bid for and was declared the preferred bidder.

However, rather than comply with the Supreme Court order, BPE, like it did in 2004, again revoked the offer, ignoring the discrepancies it the offer letter and SPA, which BFIG had sought clarifications to on more than one occasion.

The revocation of the offer had compelled BFIG to return to the court to seek the enforcement of the ruling in 2013. But, BPE joined UC RUSAL to oppose the application. However, the court in its ruling in September 2014 directed BPE to “fully enforce and give effect to the meaning and intendment of the judgment of the Supreme Court of July 6, 2012,” a resolution that was ignored.

Still not satisfied, the Russians through Dayson Holdings filed an application on behalf of UC RUSAL in November 2015 to demand the Supreme Court to, not only review its July 6, 2012 judgment, but also set it aside altogether, and confirm it as the owner of ALSCON.

The court on July 11, 2016, in a unanimous judgment, by a five-member panel led by Justice Olabode Rhodes-Vivour, rejected the request as incompetent and without merit and consequently dismissed same.

Despite the Supreme Court ruling, the ownership of ALSCON has not changed. Even at a point, the House of Representatives Committee on Privatisation and Commercialisation had sought to intervene in the matter. At the end of a public hearing on the non-implementation of the Supreme Court ruling, it urged BPE to comply with the rule of law and take steps to take control of ALSCON from UC RUSAL. Still, nothing happened.

Even the Court of Appeal in a judgment delivered on January 11, 2019 by Justice Abdu Aboki had reaffirmed previous rulings that ordered BPE to enforce the 2012 Supreme Court ruling on the ALSCON crisis. Specifically, the Appeal Court directed BPE to “provide the mutually agreed SPA (Exhibit BPE1) for execution by the parties.”

The SPA, the judge said, would “enable BFIG to pay the agreed 10 per cent of $410million (about $41million) within 15 working days from the date of the execution of the Share Purchase Agreement in accordance with the agreement dated May 20, 2004.

“The balance of 90 per cent of the bid price shall be paid within 90 calendar days as ordered by the Supreme Court,” he said in his judgment.

Many analysts have argued that even if the ALSCON is eventually handed over BFIG today, it would find it difficult to effectively run the plant. This is because since 2006 when BPE handed over ALSCON to UC RUSAL on a “willing seller, willing buyer” arrangement directed by then President Olusegun Obasanjo, BFIG has been alleging massive asset stripping by the Russian company. Citing figures in the KPMG’s audited financial accounts for December 31, 2011, it said from about $1.1billion in 2004, ALSCON’s assets valuation dropped to about $0.94 million (about N14.57 billion).

For now, nothing has been heard from BPE making observers to wonder if its refusal to comply with the courts’ judgments is not part of the impression they already have of the President Muhammadu Buhari administration as further consolidating its culture of violation of the rule of law and not upholding the independence of the other arms.

Even though they know that the dispute predates the government, they believe that the number of judgments, ruling and orders so far delivered on the case during the life time of the administration and the refusal to comply with them, certainly does not speak well of it in the area of maintenance of the rule of law.

In his article published recently in THISDAY, Stanley Ibe, a Research fellow with the Human Rights Law Service (HURILAWS), said two factors that investors consider when rating a country is whether they will have access to suitable mechanism for the resolution of disputes and country’s compliance to the rule of law. He submitted that a stable legal framework is one key ingredient needed to drive economic activities in the country.

According to him, few investors will be keen to invest in any country without reasonable guarantees not only that their fundamental rights and freedoms will be respected at all times, but also that the laws will be correctly and effectively applied and complied and obeyed in cases of dispute or other differences.

“When I see the president or state governors always running overseas to in search of foreign investors, I always laugh. These are the same people whose institutions do not respect and obey court orders. Sometimes I wonder why there is endless litigations in the ALSCON case. Not even when the Supreme Court had on more than two occasions ordered the BPE to handover the company to BFIG. Since they won the bid, give them the company.

At best, sign an agreement with them that if they display any incompetence in the management of the company, it would be taken over from them instead of the lingering litigations and embarrassment of the courts,” said a Senior Advocate of Nigeria who did not want his name mentioned in print.