‘Executive Order in place to correct constitutional error’

Founding Partner, George Etomi & Partners, George Etomi is a leading commercial lawyer with more than four decades of practice across key sectors. A former Chairman of the Nigerian Bar Association, Section on Business Law [NBA-SBL], Etomi, a member of Center for Petroleum Law Research (CPLR), has special interest in energy and natural resources field. In this interview on TVC’s Beyond the Headlines show, Etomi speaks on the recent Executive Order on Remittances of Petroleum Revenue, NNPC Limited and other emerging issues in the oil and gas sector. Excerpts:

There are arguments that an Executive Order cannot amend, suspend or even override provisions of an Act of the National Assembly. Section 43 Sub-section 3 of the Constitution vests ownership of the firm in the federation. Yes. But management they say is to be as prescribed by the National Assembly. So now that implementation has begun and directives have already been issued to NNPC Limited, is the president legally empowered to neutralise provisions of the PIA without legislative amendment?

Well, let me let me put it this way. Let me say there’s a distortion between balancing two inequities that we find here. One is that the PIA itself those provisions exist in direct violation of the Constitution which requires that all revenues accruing to the federation must be consolidated and go into the federation account. So a PIA provision that says you can take some of these monies off the top is indirect conflict with that constitutional provision. Then the second leg of this is can an Executive Order then be used to essentially correct its anomaly.

For me, the way I look at it is that the Executive Order, whilst per se you cannot argue that it should be used to amend an existing law, in this particular instance, you should go beyond this procedural picture that’s emerging and look at what the substantive legal reality is. And that is, that this Executive Order primarily seeks to rectify a fundamental structural defect within the PIA, bringing legislation in alignment with the constitution and that is how you would look at it. What is an Executive Order in this context? It is not defined generally speaking, but we all know that it is an Order that has been defined and has as one that is issued by and on behalf of the President and it’s intended to direct or instruct actions of executive agencies or government officials or to set policies for the executive branch in government. So they are actually, basically directing the executive branch of government to do something. Now Section 5.1 of the constitution vest executive powers of the federation in the President. It says that vesting extends to the execution and maintenance of the constitution and all laws made by the national legislature.

Similarly, Section 315, 2 and 3 and 4 empowers the President to make such modifications in the text of any existing law as he considers necessary or expedient to bring that law into conformity with the provisions of the constitution.

So what you see here, if you want to be pedantic about the legal definitions here, is that when you see a law that violates the constitution and an Executive Order is then issued to an agency of government to bring their action in line with the Constitution, I really don’t think there’s anything wrong provided it is done in a temporary fashion. Indeed, in other words, giving a long enough time for a formal legislative amendment of that law. I don’t think the rationale behind this is to be argued.

Clearly, we cannot continue with a system that allows an agency of government to cream off the top revenues that should accrue to the federation account and should be shared between the federal government and states and local governments. So that for me; then we don’t even now want to go into the specific issue of how that was done; the transparency involved. I think that we’ve had sufficient arguments to say that this is unassailable. So the issue here is that will such an action deter investment in opinion? I have spoken to quite a number of investors in the sector both foreign and local and many of them have expressed concern about this clear preference or undue clear advantage given to the NNPC and nothing more and monies that are not accounted for put in their hands for whatever reason. So for them the NNPC would be restored to what the rule was intended under the PIA.

The conversation on the other side is that we have spent nearly 20 years debating and negotiating the PIA to restore investor confidence. Even with the transition period now, it has been approved to respect contractual and financial obligations. Does using an Executive Order to alter its fiscal framework risk sending a message that perhaps a regulatory regime can change overnight? How do we convince international oil companies that this isn’t policy instability?

I don’t think so. I think this in this particular case, this is a one-off. Under the PIA we talk about was 20 years in the making. It was horribly passed in the end. So much was smuggled in. For many of us who worked on the original version, we never anticipated some of the things we have seen in this law.

But it was just as if we’ve got to a point. We need to commercialise the NNPC. We need to pass a law. We need all the aggregate of laws buried in various legislation should be consolidated in one PIA. That’s been done. But the PIA still needs in fact just as it was passed, it needed to be amended and one of the troubling provisions was this particular one and since the Executive Order has savings provisions for existing contracts, then I don’t think it will affect investor confidence but by far what would have been a deterrent to investor confidence it’s the opacity around how these funds were being utilized. So we will see greater transparency.

Look, let the NNPC go to the market like anybody else. Let them run like the commercial entity it was conceived to be. And if you look at examples all over the place, Saudi Aramco and everything that they don’t take money belonging to the state of the top, they go through a budget system; they declare profits; they run the way commercial entities are designed to run. And we shouldn’t escape from that reality. The PIA is long overdue for amendment. But I know that a procedure to amend the PIA will, God knows; look at how it took us 20 years to do the original one.

I wonder how much longer it will take. Yet this palpable dysfunction was allowed to stay. You just think about it. You take 30 per cent off here, 30 per cent off there, you do another 20 per cent. Then what’s actually in the end accruing to the federal government from these activities of NNPC? So this is the question and I think anybody who wants to look at how the entire oil and gas industry can be saved will understand that this levels the playing field. So the pressure here on the NNPC is just to go out there and compete.