SUPREME COURT TAKES THE ISSUE OF FEDERAL HIGH COURT JURISDICTION TO ANOTHER WORRISOME DIMENSION

The “acrimony” between the Federal High Court and the State High Courts as it pertains to the jurisdiction of both courts appears to have the eternal status of the war between Israel and Palestine.

In the recent case of Statoil (Nig.) Ltd v. Inducon (Nig.) Ltd & Anor [2021] 7 NWLR (Pt. 1774) 1, the problem emanated from the provisions of Section 251(1)(n) which provides that the Federal High Court shall have exclusive jurisdiction to hear and determine matters touching on mines and minerals (including oil fields, oil mining, geological surveys and natural gas).

The Respondents, Inducon (Nig.) Ltd. and Dr. John Abebe, sued the Appellant, Statoil (Nig.) Ltd. at the Federal High Court where they claimed that they were contractually entitled to a 1.5% share of the net profits accruing to the Appellant from the oil the Appellant produced from the oil fields or blocks licensed or leased to the Appellant, due from the brokerage efforts of the Respondents.

The cause of action was that the Respondents contended that after they had helped the Appellant to secure the license or lease of some oil blocks from the Government, and it had started producing oil, the Appellant refused to fulfill its alleged contractual obligation to pay them the 1.5% of the net profit made from the oil produced. The Respondents’ case succeeded at the trial Court and the Court of Appeal.

At the Supreme Court, Chief Wole Olanipekun SAN led other Senior Advocates in contending, on behalf of the Appellant, that the Federal High Court lacked jurisdiction to entertain the suit on the basis that the alleged contract for 1.5% of the net profit made from the oil produced was purely a simple contract which only the State High Court has jurisdiction to hear and determine.

Uche Nwokedi, SAN in responding on behalf of the Respondents argued that the Federal High Court is vested with the jurisdiction to entertain disputes relating to mines and minerals including oil fields, oil mining, geological surveys and natural gas. Learned Counsel argues that the jurisdiction extends to the hearing and determination of all issues flowing from these, for which the alleged contract for 1.5% of the net profit made from the oil produced by the Appellant is a part.

In an unimaginable decision on the issue of jurisdiction delivered on 5 February 2021, the Supreme Court held (4 to 1) that the Federal High Court lacks jurisdiction. Leading the line in this decision was M. D. Muhammad, JSC who held (at page 54) that the claim “is rooted in simple contract.” Mary Peter-Odili, JSC agreed, adopting wholly the reasoning of Muhammad, JSC. Amina Augie, JSC concurred without much analysis. Aboki, JSC also agreed. His Lordship, Aboki, JSC held that the Federal High Court lacks jurisdiction notwithstanding his earlier statement at page 74 thus:

It is not in doubt that leasehold interest or net profit interests which is derived from interests held in oil concessions, which interests concern oil production sharing contracts, and joint venture agreements, which govern such relationships including acts which are dependent on ministerial consent, are governed by Section 251 of the 1999 Constitution, which is the exclusive domain of the Federal High Court.

Agim, JSC’s Dissenting Opinion

Agim, JSC distanced himself from the Supreme Court’s train which, with the greatest respect, appears to have thrown the wind of clarity into chaos as far as the jurisdiction of the Federal High Court is concerned. His Lordship reasoned at page 82 as follows:

In my opinion, once the subject matter of the dispute is within the subject matter jurisdiction of the Court, the nature of the disputed agreement or contract is irrelevant. There is nothing in S. 251(1)(n) and (s) of the 1999 Constitution and S. 7(1)(n) and (3) of the Federal High Court Act (as amended) that justify the exclusion of a contractual dispute arising from mining oil from an oil field from the exclusive jurisdiction of the Federal High Court on the ground that it is a simple contract.

His Lordship was right. How can an alleged contract for payment of 1.5% of the net profit made from the oil produced by the Appellant not be founded within the ambit of mines and minerals (including oil fields and oil mining) as mentioned in Section 251(1)(n) of the 1999 Constitution (as amended) so as to confer jurisdiction on the Federal High Court? How can the Supreme Court separate such relationship and tag the alleged contract a simple contract possibly falling from the moon?

When the courts held that the Federal High Court lacks jurisdiction to treat “simple contract” cases and that same are to be determined by the State High Courts alone (Adelakan v. Ecu-Line NV [2006] 12 NWLR (Pt. 993) 33), the idea was clearly that such contracts must not have any bed to sleep on in any of the rooms listed under Section 251(1) of the Constitution or in any other statute.

Agim, JSC, at page 83 gave a sound conclusion:

Where the subject of a contractual dispute has no relationship with any of the subject matters listed in S. 251(1) of the 1999 Constitution and S. 7(1) of the Federal High Court Act within the exclusive jurisdiction of the Federal High Court or does not arise from any transaction in such subject matters, it remains simply a contractual dispute that is not within the jurisdiction of the Federal High Court, not because it is a simple contract, but because it is not related to or arising from any of the items in S. 251(1) of the Constitution and S. 7(1) of the Federal High Court Act. If it is a contractual dispute relating to or arising from the said items, then it is within the exclusive jurisdiction of the Federal High Court.

 

PS: It is worthy of mention that aside the issue of jurisdiction, the Supreme Court unanimously agreed that the appeal has merit and was allowed. The Supreme Court held that the alleged contract for the 1.5% of the net profit made from the oil produced by the Appellant payable to the Respondents was not proved. Also, the apex Court found that the suit was caught by statute of limitation and consequently statute-barred.



Stephen Azubuike
Author: Stephen Azubuike
Stephen is a lawyer with expertise in Commercial Dispute Resolution and Technology Law practice. He is a Partner at Infusion Lawyers. He has successfully argued cases from the High Courts of various jurisdictions to the Appellate Courts on behalf of financial institutions, other corporate bodies and multinationals. He has worked with a number of startup tech companies. He tweets @siazubuike.

9 Comments

  • Precious Nwadimuya

    Na waooo! Let me just reserve my comments. But meanwhile, did Agim, JSC also agree that the contract was not proved?

    • Stephen Azubuike

      Yes. It was held that the acceptance of a proposal for the negotiation of an agreement does not bring into existence the agreement yet to be negotiated. The Court found that the alleged agreement for 1.5% commission was never reduced to a formal contract beyond the negotiations.

      • Emeka Ibe

        And what exactly is a negotiation at which a party put forward an offer (1.5%) and the other party acquiesced, i.e. did not reject the offer or make a counter offer? Must acceptance always be express?

  • Kingsley Okoro

    If there was no contract or agreement between the parties in an arrangement in which consideration has already been furnished by a party, then on which premise did the appellant go into and continue with production.
    Did he make a counter offer. Was the counter offer accepted. What was its contemplation as regards the consideration which must necessarily glow from it.

  • H. O. Abaya

    Going by provisions of section 251(1) n of the 1999 constitution as amended I am in total agreement with the lead judgment that what transpired between the parties was just a simple contract and as such FHC lacks jurisdiction to entertain same.
    The Respondent assisted (maybe with influence) in getting licence for oil blocks on the strength that in turn the appellant will be giving her commission on the net profit from oil produced. To me, this is a simple contract. For instance if I assisted Mr. Azubuike to get employed by Nigeria Army on the strength that he will be giving me 5% of his salary. So if Mr. azubuike fails to comply with our understanding can I sue him before a court Martial..? I think the answer is NO

  • Kamo Sende

    With respect, I agree wholly with the submission of my lords in the lead Judgement. Agim JSC in my opinion missed the mark when he didn’t recognize that the source of the dispute is a breach of a simple contract. Resolving a simple contract is within the purview of the State High Court.
    Placing reliance on Section 251 to confer Jurisdiction on the FHC is digging deeper into the case than necessary. What is before the court is resolving a case of a simple contract to pay the 1. 5% and it should have rightly gone to the State High court. The respondents assisted in getting a licence and they went into an agreement for a percentage. It is the agreement that is in dispute. It does not fall under the contemplation in 251.
    I’m minded based on the above to stand with the position of my lords.

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