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OPLs 321, 323: S-Court declares revocation illegal

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By Sebastine Obasi

LAGOS— Korea National Oil Corporation, KNOC, has every cause to be happy as the Supreme Court has ruled that the decision of the Federal Government to re-award oil prospecting licences, OPLs, to ONGC/Owel Petroleum Consortium was illegal.

The oil blocks were originally awarded to KNOC.

In a four-to-one judgment, the Supreme Court in the suit numbered SC114/2013, between President of the Federal Republic of Nigeria and three others Vs. KNOC and six others, affirmed the decision of the Court of Appeal by declaring that the action of the President, which was taken in 2009, was not within his executive powers.

The dispute commenced in 2009, when KNOC filled an action against the Federal Government entities at the Federal High Court of Nigeria. In the suit leading to the Court of Appeal and the Supreme Court, the Federal High Court had upheld all KNOC’s claims against the Federal Government and had held that the decision of the President contained in a letter of January 8, 2009, purportedly revoking KNOC’s interests in the OPLs was illegal.

The Federal High Court held that the late President Musa Yar’Adua had no powers to void the allocation of the OPLs. The court further held that even if the President had such powers, it failed to comply with the procedure laid down in the Petroleum Act for revocation of interests in OPLs.

The Federal High Court, therefore, voided and quashed the revocation on grounds that the decision of the President revoking KNOCs interest in the OPLs was illegal, procedurally unfair, unreasonable and against the legitimate expectation of KNOC.

Dissatisfied with the decision of the Federal High Court, Owel Petroleum Services Nigeria Limited went to the Court of Appeal.  Owel was not an original party to the suit, but joined after the commencement of the action at the lower court. Although the Court of Appeal, in its judgment, disagreed with the commencement of the action by judicial review and thus held that the Federal High Court lacked jurisdiction, it proceeded to consider the substantive issues in dispute among the parties.

With regard to the substantive issues, the Court of Appeal found, in agreement with the Federal High Court, that the President’s revocation of KNOC’s interests in OPLs 321 and 323 was wrong as the President has no power to void the allocation of the OPLs. The Court of Appeal also held that the Side Letter granting KNOC a discount on the signature bonus in consideration for a USD6billion investment by KNOC in strategic downstream project, was invalid.

Dissatisfied with the decision of the Court of Appeal, KNOC, Owel and the Federal Government entities, filed separate appeals to the Supreme Court challenging some findings of the Court of Appeal, primary of which were, the decision of the Court of Appeal on the technical issue as to the mode of commencement of the suit and more substantive issues such as the legality of the Side Letter and the revocation of KNOC’s interests in the OPLs.

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