Avoiding Pitfalls in Negotiated Agreements

Development

Recent developments that have put Nigeria in a precarious situation, with billions of dollars lost to some unscrupulous foreign businessmen with the active connivance of criminal elements in Nigeria, has necessitated the importance of arming relevant government officials, representing the country in international trade and contract agreements with requisite negotiating skills to avoid pitfalls, associated with a number of bogus foreign deals. Kunle Aderinokun reports

In 2010, P&ID entered a 20-year gas contract with Nigeria under the terms of building and operating a plant to refine natural gas into “lean gas” in Calabar, Cross River State. Gas was being flared in the Niger Delta region of the country and the federal government thought it wise to have a company convert some of the wasted and poisonous gas into electricity in the face of Nigeria’s perennial power woes.

The contract also stated that the government would install the necessary pipelines and infrastructure and receive the lean gas free of charge to power Nigeria’s fragile national grid.

However, the contract was never executed and the contractor (P&ID) dragged the Nigerian government to court in 2012, alleging breach of contract.

In August of 2019, P&ID won its case against Nigeria. Initially awarded for $6.6billion, the contract sum later rose to $9.6bn due to accrued interest since 2013.

According to the New York Times, government officials said the contract was signed while late President Umaru Musa Yar’Adua was critically ill and Goodluck Jonathan was Acting President.

However, former President Goodluck Jonathan had denied any knowledge of the contract.

Nigeria’s Attorney General and Minister of Justice, Abubakar Malami, said the contract had been signed with no clear terms and conditions and that it “was engineered to fail” and defraud the country.

The President Muhammadu Buhari Administration, which took over from the Jonathan government, said the contract was fraudulent from inception and those involved, including Nigerians who signed it, did so to defraud the country.

Nigeria has been entangled in legal suits in the last couple of years due to poorly negotiated contract agreements, which have resulted in illicit financial flows and loss of revenue for the country.

Although commercial agreements have aided development of nations, experts have also argued that poorly negotiated contract agreements are bane of economic growth and development. They lead to losses rather than anticipated economic development.

Worried by the lack of understanding of contract agreement negotiations by government officials, the Independent Corrupt Practices and Other Related Offences Commission (ICPC) and Inter-Agency Committee for Stopping Illicit Financial Flows from Nigeria held a two-day physical and virtual capacity building for middle level negotiators drawn from the Ministries, Departments and Agencies of government.

The training was to improve the terms of engagement and mitigate illicit financial flows by negotiators on behalf of the federal government.

Vice President Yemi Osinbajo, SAN, who addressed the negotiators on the first-day of the training programme, expressed the hope that the capacity building would be the start of a structured regular programme of training for negotiators in the areas of investment, trade, environment, natural resources and taxation agreements.

He said, “I expect further down the line that negotiators of other similar agreements financial, air services, shipping, fishing rights and such like will also be included in the programme.

“Our objective must be to build a corps of crack negotiators and subject matter experts in international economic agreements and indeed to develop what should emerge as a national style of negotiations.”

Referencing instances of agreements that brought about undesirable outcomes for countries, the Vice President noted that the Simandou Iron Ore contract in Guinea, the Bilateral Investment Treaty in Pakistan, and the Strategic Alliance Contract in Nigeria, among others, point to the fact that “poorly negotiated contracts or framework agreements can lead to serious financial losses for countries.”

He explained that, one of the most significant sources of economic loss for a country is the consequence of poorly negotiated agreements.

Osinbajo noted that “every negotiator must realize he or she is putting the entire nation’s economic prospects on the table every time they negotiate.

“My position is that depending on the size of some of these contracts, and their implications, external counsels who are subject matter experts, should be involved at all stages of the negotiations.”

In preparation for the Climate Change Conference of Parties (COP 26), the vice president urged that negotiators from Nigeria and other developing countries must be focused on issues of a ‘just transition’ to the net-zero emission target, including ensuring that gas projects continue to be funded by international financial institutions.

According to him, “a topical issue in terms of negotiations is the preparation for the Climate Change Conference of Parties taking place in the United Kingdom towards the end of this year.

“I expect that the approach that will be taken as we count down to that event will be to compose an interdisciplinary team of experts and negotiators that can engage meaningfully in the talks.”

Osinbajo charged participants at the workshop to come up with new draft guidelines for negotiating contract agreements which should be submitted to the federal government for consideration.

He said, “There is need for this workshop to come up with new draft guidelines for negotiating contract agreements to be presented to the government for consideration. The guidelines will set out steps and processes for negotiating investment, trade and other contract agreements for Nigeria.”

Osinbajo attributed corruption, compromise and lack of transparency for poor contract negotiations and implementation in Nigeria, noting that these have resulted in huge loss of revenue through illicit financial flows from Nigeria.

“It is not just poor negotiation; poor monitoring and implementation of contract agreements have dire consequences for the country. Corruption, compromise and lack of transparency are key factors in poorly drafted contract agreements,” he stated.

He urged the participants at the capacity building to pay more attention to the dispute resolution clauses which, according to him, are often skewed against the country.

Osinbajo commended the Inter-Agency Committee for Stopping Illicit Financial Flows from Nigeria and the ICPC for organising the training programme for negotiators.

The Chairman of ICPC, Prof. Bolaji Owasanoye, SAN, revealed that fresh draft guidelines for negotiating contract agreements will be prepared by the Inter-Agency Committee for Stopping Illicit Financial Flows from Nigeria and presented to the Office of the Attorney General of the Federation and the Federal Government.

In his presentation at the capacity building titled “Guidelines for Negotiating International Agreements for Economic Development”, Owasanoye emphasised the need for the Office of Attorney General to be the depository of all contract agreements signed by the country and ministries, departments and agencies of government.

According to him, “At the moment, there is no mandatory depository obligation of all major agreements by MDAs. The Office of Attorney General of the Federation ought to be the official depository for all agreements.”

The ICPC boss called for the establishment of foreign agreements registry/oversight functions for the Office of Attorney General of the Federation and the National Assembly, saying this will reduce problems of opacity of contract agreements.

He underscored the importance of negotiation of (commercial) agreements and economic development.

“Poorly negotiated/implemented agreements stultify development. More importantly they lead to losses rather than anticipated economic development. Therefore, there is a strong nexus between negotiation of agreements and attaining the aspiration to develop.

“The negotiation process is therefore important to development. Often times, negotiators mistakenly assume that beneficial agreements can be concluded mainly by diplomatic, political, compassionate, human rights or other non-legal considerations alone,” he added.

The Chairman of Inter-Agency Committee for Stopping Illicit Financial Flows from Nigeria, Dr. Adeyemi Dipeolu, identified poorly negotiated and hidden contracts as one of the most identifiable ways through which illicit financial flows happen.

He noted that the training was necessary to develop a crop of Nigerian officials skilled in international negotiations in general and with specialisation in key thematic areas.

“This workshop is being organised to help the Nigerian negotiating officials cope with international obligations. We want to develop core people who will make sure that agreements signed for the country and government do not lead to illicit financial flows,” he remarked.

Offering practical tips for successful negotiations, Dipeolu accentuated the need for preparation through assembling a strong inter-disciplinary team, knowing negotiating objectives and obtaining a negotiating mandate.

He also advised the participants at the workshop to focus on dispute settlement matters during negotiation of contract agreements.

“It is very important that you pay close attention to the clauses on dispute settlement matters. The agreements must comply with Nigeria’s legal requirements,” said Dipeolu, who is also the Special Adviser to the President on Economic Matters (Office of the Vice President).