A graduate of the University of Nigeria, Enugu Campus, where he obtained a bachelor’s degree in Law, and of Columbia University in New York, USA where he bagged a masters degree, also in Law, Chukwuka Ikwuazom currently serves as a Partner at Aluko & Oyebode, one of Nigeria’s foremost law firms as well as head of the disputes and taxation practices at the firm. Born in Enugu, Nigeria, he is admitted to the practice of law in both (since 2002) and in the US state of New York. He joined Aluko & Oyebode in 2002, rising to a Partnership of the firm in 2011. A fellow of the Chartered Institute of Taxation of Nigeria, Ikwuazom’s pedigree in his chosen area of practice, and the high esteem in which his abilities are held by his colleagues in the legal profession in Nigeria, were recently attested to when he was named to chair the organizing committee of the inaugural Oil and Gas Conference organized by the Lagos branch of the Nigerian Bar Association (NBA).
In this wide-ranging conversation with the editors of NEWSWIRE Law & Events Magazine, Ikwuazom sheds light, among other things, on the growing role (and obligations) of lawyers as key players in the financial as well as legal workings of the Nigerian economy as it positions itself, not just to recover from current challenges, but also to erect a solid framework for lasting growth and prosperity.
What was the motivation behind your convening the first oil and gas conference? The oil and gas conference was the brainchild of Mr. Martin Ogunleye, the Chairman of the Nigerian Bar Association, Lagos Branch. He approached me and asked that I chair the Conference Organizing Committee. According to him, there had been three previous unsuccessful attempts to convene the conference. It was obvious from my conversation with the Chairman that he and his Executive were committed to the convocation of the conference in furtherance of their passion for continuing legal education of members of the Premier branch. I had no hesitation whatsoever in accepting the responsibility because the passion for continuing legal education is one that I strongly share. I believe that any association of lawyers that is serious about the professional development of its members must take continuing legal education seriously. Indeed, in some jurisdictions, you cannot be a member in good standing if you do not acquire a minimum number of continuing legal education points every year.
As chairman of the organizing committee, what were the challenges your committee encountered in putting this together?
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The primary challenge was raising the funding for the conference in a recession and at a time of donor fatigue. We had decided from the outset that we were going to make the conference affordable for all our members and in particular young members of our branch. I believe that it does not make sense to organize trainings, seminars and conferences and then price them out of the reach of the younger members of our association who need the training the most. We were also not going to lower the standards of the conference in order to price it cheaply. This point considered, it was therefore critical to raise funds to subsidize the conference.
To overcome the fund raising challenge, we considered issues that were likely to catch the attention of potential sponsors? We decided that we needed to formulate subjects that were topical and assemble an excellent Faculty. We noted that with the falling price of crude oil, some credit facilities that were taken by oil and gas companies on the assumption of higher oil prices were obviously at risk of debtor default if not restructured. As a result we decided that one of the subjects to be addressed at the conference would be “the issues arising in the restructuring of oil and gas transactions”. We also thought that many potential sponsors would be interested in a conference that would discuss the reforms that were considered necessary to stimulate growth in the oil and gas sector. Finally, considering the long standing interest of the government and the oil companies in the fiscals (i.e. tax, royalties etc), we included a topic on the legal issues arising in oil and gas taxation. In hindsight, I will say that the topics together with the assemblage of an excellent Faculty (members of which were drawn largely from our branch) helped significantly in raising the funding for the conference. At the end, we were able to offer massive discounts for the cost of attendance for many of our members and particularly young lawyers. We were eventually able to offer scholarships to some of our young members who were randomly selected to attend the conference at no cost at all.
Some may question the timing of this conference and ask why wait until the current downturn before holding this conference. Why didn’t the Lagos NBA hold it earlier, when prices were high?
As I already mentioned, there had been attempts to hold the conference in the past. Having said that, I also think that there is no good or bad time to hold an oil and gas conference in Nigeria. Despite efforts at diversification, my view is that petroleum is and will remain, for a long time, Nigeria’s highest revenue earner. So, we must continue to interrogate the issues which arise in this all important sector of our economy. Importantly an economic downturn can present opportunities for lawyers. For example, an economic downturn may necessitate the restructuring of credit facilities and lawyers play a role in such restructuring. Lawyers may also have a role in recovering bad debts occasioned by a downturn in the economy. A conference that can help lawyers acquire the skills required to perform these roles cannot come at a wrong time.
You’ve argued tax disputes in court severally. Do you sense a shift in tax policy (and attitudes) as a result of this downturn?
Undoubtedly, the Nigerian government had not, in the past, focused the way it perhaps should on tax revenue because of the revenue that had come from oil. It is only natural that with diminishing oil revenues, the government is now focusing on other sources of revenue including taxation. To answer your question simply, yes, we are beginning to see the government push the envelope in relation to taxation in a manner that it had not done previously.
One of the conclusions of the conference was that reforms are long overdue in the financial, regulatory and taxation framework of the industry. What role do you envisage for lawyers like yourself in bringing about these reforms?
I have always maintained the view that lawyers should be at the forefront of reform efforts. If you look at associations of lawyers elsewhere like the American Bar Association, they are able to maintain their relevance by providing alternative viewpoints. This can be done in different ways including through provision of draft legislation to drive reforms. You will recall that the immediate past president of the NBA, Mr. Augustine Alegeh, SAN set up a committee of the NBA that produced a draft Petroleum Industry Bill to the National Assembly. I was privileged to serve on that Committee with eminent members of our profession such as Professor Yinka Omoregbe and Professor Idornigie, SAN.
Along with the challenges your conference addressed, the oil and gas industry in Nigeria is riddled with corruption. How will the recommendations of this conference get past the hydra-headed monster of corruption?
One of the focal points for the current administration is tackling corruption in our country. So far, I believe the government has made significant progress in this regard. It was clear from the lead presentation of Professor Omoregbe on the critical reforms needed in the oil and gas sector and from the interventions of other panelists that a lot of governance-related and institutional framework issues need to be addressed to curb corruption in that sector. The minimization or complete removal of ministerial discretion in the process of allocating oil assets, the streamlining and simplification of approval processes, clear and simplified regulations, the elimination of multiple regulatory authorities and of course, judicial reforms to ensure quick and efficient resolution of oil and gas related disputes are some of the recommended reforms which if implemented will go a long way in minimizing or eliminating corruption in the sector.
One will hope that the Petroleum Industry Governance and Institutional Framework Bill currently pending at the National Assembly will address some, if not, most of these issues.
What about environmental sustainability? How often do lawyers take the environment into account when advising their clients?
Environmental sustainability is an issue that lawyers are aware of and this consciousness has increased particularly with recent regulatory developments in this regard. Recall that in 2016, Nigeria signed the Paris Climate Change Agreement which is aimed at reducing “Green House Gas Emissions unconditionally by 20 per cent and conditionally by 45 per cent.” The Bill to amend the NLNG Act, currently before the National Assembly, has just been passed by the House of Representatives and is currently before the Senate. The aim of the amendment to the Act is to end environmental degradation and gas flaring by year 2020. These are in addition to existing laws and regulations aimed at protecting the environment.
Environmental issues are taken into consideration and often form a significant part of advice provided to clients who operate in the oil and gas industry especially at the early stages of a transaction. It is the role of a diligent lawyer to ensure that his client is aware, not only, of the regulatory implication of the client’s activity as it affects the environment but also of the client’s social obligation to ensure that operational activities do not produce adverse environmental consequences.
For the lay person out there, please analyze for us the ruling in the case of Moni Pulo vs Brass, and what impact it portends for the profile and fortunes for oil and gas operations in Nigeria?
The Moni Pulo case, involved the purported transfer of the entire shareholding in a company that held a 40% participatory interest in OML 114. The company in question was Moni Pulo’s partner in the OML. One of the main questions before the court was whether the acquisition of the entire (100%) share capital in the company holding a 40% participatory interest in the OML amounts to an assignment and/or takeover of the right, power or any interest in the company’s 40% participating interest in the OML requiring the prior consent of the Minister.
The Court held that whoever buys, acquires and takes over the controlling shares of the company ultimately buys, acquires and takes over the right, power and all the interest in the company’s 40% participating interest in the OML must seek approval of the Minister prior to such exercise of right, power and interest. Therefore, such sale, transfer and/or conveyance of the controlling shares of the company is subject to the approval of the Minister of Petroleum Resources to give such an assignee the right, power and interest in the takeover of the company. The central reasoning behind the decision, based on the Court’s interpretation of the provisions of the Petroleum Act and relevant Petroleum Regulations, was that the Minister of Petroleum Resources has a duty to satisfy himself that persons who have acquired shares in the holder of a participating interest in an OML are qualified to participate in the OML.
The implication of this decision is that consent of the Minister will generally be required for an assignment of an oil asset or licence or the acquisition of controlling shares in the asset owning entity. In furtherance of this decision, the Department of Petroleum Resources issued the Guidelines on Ministerial Consent which establish the procedure for obtaining the prior consent of the Minister of Petroleum Resources to any assignment of any right, power or interest in an OPL, OML, Marginal Field or Oil and gas Pipelines licence in accordance with the Petroleum Act and the Oil Pipelines Act.
While the decision and guidelines provide some clarity with respect to the requirement for ministerial consents in connection with the transfer of interests in oil and gas concessions, there are some grey areas which impact on transactions within the industry. For instance, in oil and gas financing transactions, it is customary for the lender to take a charge over the shares of a borrower. The enforcement of that security interest will (following the decision in the Moni Pulo case), require the consent of the Minister of Petroleum Resources, who will need to be convinced as to the technical and financial capability of the proposed transferee. It is also customary to take a floating charge over the oil block because a floating charge would usually not attach to the asset. The crystallization and enforcement of such security will also require the consent of the Minister as it would involve the transfer of an interest in the asset and there is no guarantee that the Minister will grant the consent at the relevant time. This results in some uncertainty for lenders in the oil and gas sector.
The guidelines are also silent on the timeline within which Ministerial consent should be granted. One of the recommendations at the conference is that a review of the legal framework should include a defined timeline within which ministerial consent should be granted in order to avoid significant delays to acquisition, divestment financing and other transactions involving the transfer of interests in oil and gas assets.
It is hoped that with future legal and regulatory reforms within the sector, these uncertainties will be addressed.
Will the recommendations of the conference change once oil prices bounce back again, or are they designed only to weather the current storm?
Irrespective of the economic conditions, factors such as transparency, accountability, predictability, protection of investments, environmental responsibility and economic benefits are core to the development of a sustainable oil and gas sector. As an immediate measure, the recommendations from the conference are aimed at steering the sector out of the current economic challenges. Beyond this purpose, the recommendations also aim to serve as a framework and provide the foundation upon which future legislation for the continued growth of the sector will evolve. Therefore, it is hoped that the will and commitment to implement these recommendations remain even after the economic situation is stabilized.
Is the Oil and Gas Conference designed to be an annual conference of NBA Lagos Branch?
I think that it would be a great idea if it becomes an annual event.
Who is Chukwuka Ikwazom? Tell us briefly about yourself; background, growing up and education.
I was born and bred in Enugu. I obtained my law degree from the University of Nigeria, Enugu Campus and was subsequently admitted to the Nigerian Bar in 2002. I obtained a Master’s degree in law from Columbia University, New York. In addition to my admission to the Nigerian Bar, I am also admitted as an attorney in the State of New York. I joined the law firm of Aluko & Oyebode in 2002 and was admitted into the partnership of the firm in 2011. I am a fellow of the Chartered Institute of Taxation of Nigeria and head the taxation practice of my firm. I am married to Uche Ikwuazom and the Lord has blessed us with three lovely kids – 2 boys and a girl.