Araraume, NNPCL and Disruption in Oil/Gas Sector

As the verdict by Justice Inyang Ekwo of the Federal High Court over the unlawful removal of Senator Ifeanyi Araraume – as chairman of the Nigerian National Petroleum Company Limited Board continues to generate huge concerns, IYOBOSA UWUWGIAREN examine the issues

The recent verdict by Justice Justice Inyang Ekwo of a Federal High Court in Abuja, setting aside the removal of Senator Ifeanyi Ararume as the Non-Executive Chairman of the Board of the Nigerian National Petroleum Company Limited (NNPC Ltd), is increasingly raising huge concerns from stakeholders in the oil/ gas sector, especially the international community.

This came as the outgoing President Muhammadu Buhari has sued for calm, saying ‘’due judicial process’’ would be followed in resolving the problem.

However, a senior management staff of NNPCL, who spoke with THISDAY, revealed that the company had received ‘’hundreds of telephone calls’’, especially from the international community, wanting to know how the NNPCL intended to resolve the matter. The near consensus among the stakeholders, according to the source, is the stability and solidity of the NNPCL at this time of uncertainty in the oil global market.

Justice Ekwo in a judgment recently held that Araraume’s removal by President Muhammadu Buhari contravened provisions of the NNPC Ltd laws as well as the Company’s and Allied Matters Act. In a nine-point declaration, Justice Ekwo declared that the office and position of Senator Araraume (the plaintiff) as non-executive chairman of the NNPCL are exclusively governed and regulated by the Companies and Allied Matters Act, 2020 and the Memorandum and Articles of Association of the NNPCL.

The judge also declared that by the provision of section 63 (3) of the Petroleum Industry Act 2021, President Buhari cannot lawfully remove Araraume as the non-executive chairman of NNPCL for any reason whatsoever outside the conditions specifically listed in the said Section 63 (3) of the PIA, 2021.

Nullifying and setting aside all decisions and resolutions of the board of the NNPCL made in the absence of Araraume, from January 17 till date, Justice Ekwo, awarded Araraume the sum of N5,000,000,000 being damages for his wrong removal, disruption and interruption of the term of his office – as the non-executive chairman of the NNPCL. The judgement has been served to all the defendants.

Ararume had last year dragged Buhari to court over his removal as the Chairman of the Board of the NNPC Ltd. He had demanded a enormous sum of N100 billion as damages caused him due to the unlawful manner he was removed as Board Chairman after his name was used to incorporate the entity.

The president in a letter dated January 17, and signed by the Secretary to the Government of the Federation, had withdrawn Araraume’s appointment without any reason whatsoever. This informed the legal action by the plaintiff.

The suit marked FHC/ABJ/CS/691/2022 was instituted on his behalf by a group of Senior Advocates of Nigeria (SANs) comprising Chief Chris Uche, Ahmed Raji, Mahmud Magaji, Ogwu James Onoja, K.C Nwufor and Gordy Uche.

Delivering judgement in the suit after dismissing a total of seven-application against its hearing, Justice Ekwo held that the case of the plaintiff had merit and subsequently ruled in his favour.

Ekwo also dismissed the claim of the NNPC Ltd that Araraume was removed because he was not qualified, involved in alleged contract fraud, amongst others, noting that no evidence of such was contained in the January 17 letter, for his withdrawal. According to the judge the defence by the NNPCL was an exercise in futility at manufacturing reasons for Araraume’s removal.

The judge held that the removal of Araraume without fair hearing by the president was, “wrong and cannot be tolerated by a court of law.’’  Justice Ekwo also held that the plaintiff having proved his case was entitled to damages.

The court also ruled that the president’s letter of January 17, without complying with the NNPCL’s and CAMA laws, “is wrongful, illegal, null and void and of no consequence and is hereby set aside.’’

Araraume had in his suit, articulated four issues for determination by the court: which was whether in view of the provisions of the Memorandum and Articles of Association of the NNPC, Companies and Allied Matters Act 2010 and the Petroleum Industry Act 2021, the office of the non-Executive Chairman is not governed and regulated by the stated provisions of the law.

He had also asked the court to determine whether by the interpretation of Section 63 (3) of the Petroleum Industry Act 2021, the president could lawfully remove him as non-Executive Chairman of the NNPC for any reason outside the provisions of the law.

The Imo politician had also asked the court to determine whether Buhari could sack him without compliance with expressly stated provisions of the Articles of Memorandum of Association of the Company, section 63 (3) of the PIA Act 2021 and section 288 of the CAMA Act 2020.

Also listed for determination was whether his purported removal vide letter of January 17, 2022 without compliance with expressly stated provisions of the law is not wrongful, illegal, null and void and of no legal consequence whatsoever.

Upon the determination of the issues in his favour, the plaintiff had wanted the court to make declaration that his position as non-Executive Chairman of the NNPC was exclusively governed and regulated by CAMA 2020, PIA Act 2021 and Memorandum of Association of the Company.

He had also sought a declaration that by the provisions of section 63 (3) of the PIA Act, CAMA Act and Memorandum of Association of the NNPC, the President cannot by will remove him from office as non-Executive Chairman without following due process of the law.

He had requested for N100 billion as damages for the wrongful removal, disruption and interruption of his term of office as non-Executive Chairman of the NNPC.

No doubt, Araraume’s case has created a huge disruption in the oil sector, especially with billions of dollars contracts awarded in the absence of the plaintiff as the non-executive chairman of the NNPCL, which the court declared as nullity recently. Before the profound judgement by Justice Ekwo, legal and energy experts had expressed concerns over the unwarranted political interference in the NNPCL by the presidency – which they said ought to have been governed and regulated by the Companies and Allied Matters law and the PIA, 2021.   

A source in the Ministry of Petroleum Resources told THISDAY that the presidency ‘’actually realized its mistakes in the removal of Senator Ifeanyi Araraume before now –  as efforts were made to persuade him to resign and be rewarded with oil blocs; but he turned down our request, telling us angrily that his name was more important than any oil bloc.’’  

‘’Appealing the judgement right now will create more crises for the oil sector; and we will soon take the necessary, lawful steps to correct our mistakes’’, the source stated.  

Many experts and stakeholders appear to be thinking in the same direction with the Ministry of Petroleum Resources. To be sure, a civil society group, Justice Now Coalition, recently called on the federal government to consider giving effect to the judgement of the Federal High Court that reinstated Senator Araraume instead of challenging the judgement,

The group, in a statement signed by its National Convener, Comrade Tony Erha, said that obeying the judgement of the court was a better and more preferred option, in the circumstance, saying appealing the judgement should be treated as a distant alternative option.

According to the group, appealing the judgement would only dilate the matter and keep it on the front burner such that it would restrain the international oil companies (IOCs) from investing their total commitment in the country’s oil sector that has virtually been rendered tentative and unstable by the court action.

 “The Federal Government should take the window of opportunity provided by the Federal High Court judgement to correct its mischief and put an end to the issue once and for all’’, the group added.

Speaking on the matter, a legal expert and Executive Director of Citizens Advocacy for Social & Economic Rights (CASER), Frank Tietie, said a prolonged court case may not be in the interest of the company, especially if the federal government decides to go on appeal.

The human rights lawyer explained that it was important to allow the rule of law to prevail in the interest of the international obligations and transactions of the NNPCL so as not to create trust deficit in its operations.

‘‘The judgement of a court is presumed to be obeyed by all parties until it is set aside. In the absence of any stay of execution, the judgement must be obeyed,’’ he stressed.

The lawyer advised that the newly reinstated non-executive chairman of the board of the NNPCL may decide to ratify decisions of the board since his removal so as not to create a situation where the operations of the company would be impacted in the negative.

Similarly, an Energy Finance Expert and former Senior Technical Adviser to Nigeria’s Minister of Petroleum Resources, Dan Kunle, said it was important for the government to always ensure that it allows the Companies and Allied Matters Act (CAMA) guide the rule of engagement for directors of limited liability companies.

He also advised that decrees should not be deployed in the setting up of boards of limited liability companies

Also speaking to journalists on the matter, a Senior Advocate of Nigeria (SAN), Mr Abdul Balogun, explained that the government had no choice but to obey the judgement of the court, except it decides to appeal it.

According to him, not obeying the judgement will send the wrong signal to the international business community.

He said, “If the government feels it has a strong case, it can appeal the judgement up to the Supreme Court. But not obeying the judgement of the court is dangerous for the image of the country because it will send a wrong signal to the international business community. The government can’t afford not to obey the judgement, if it hopes to win investors’ confidence in the judicial system.”

A Constitutional lawyer, Barrister Fidelis Amobii, shared the view of the SAN, adding that the judgement will have a far-reaching effect on the operations of the company.

As it stands, experts believe that taking Senator Araraume into confidence will go a long way in ratifying all the decisions taken in his absence as the chairman of the Board of NNPCL.