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S-Court upholds FG’s decision voiding allocation of OPLs 321, 323 to KNOC

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By Ikechukwu Nnochiri
ABUJA – The Supreme Court, on Friday, held that the Federal Government was right in voiding the allocation of Oil Prospecting Licences (OPLs) 321 and 323 to the Korea National Oil Corporation (KNOC) and re-awarding the oil blocks to ONGC/Owel Petroleum Consortium.

The apex court, in a four-to-one judgment in the suit numbered SC114/2013, between President of the Federal Republic of Nigeria & 3 others V. KNOC & 6 others, declared that the action of the President, which was taken in 2009, was within his executive powers.

Whereas the Attorney General of the Federation and Minister of Justice, Mr. Abubakar Malami, SAN, represented the Federal Government in the matter, Dr Alex Iziyon, SAN, and Chief Robert Clarke, SAN, represented ONGC/Owel Petroleum Consortium and KNOC, respectively.

The apex court held that the Executive decision, which arose from a contractual arrangement between the parties, not being a quasi-judicial act, was therefore not subject to judicial review in respect of which a writ of certiorari lies.

According to Justice Kudirat Kekere-Ekun who delivered the lead verdict, “Where there is a contractual obligation between the parties, both parties are expected to comply with the terms and conditions of the contract. Where the contract contains terms for bringing the contract to award by either party and the terms are not complied with, the remedy of the affected party lies in action for breach of contract, damages, etc.”

She held that the KNOC and its Consortium had breached the terms of the award of OPLs 321 and 323, saying in that wise, the Federal Government of Nigeria was right to have terminated the contract.

Regarding the remedy available to the Koreans in respect of the termination of the award of OPLs 321 and 323, the Supreme Court held that the case of KNOC and its Consortium at the trial court was incompetent as the act complained of was an executive act in respect of which a writ of certiorari would not lie, having arisen from a purely contractual relationship.

The apex court consequently affirmed the decision of the Court of Appeal in Abuja which easier struck out the appellant’s suit at the trial court.

The grievance of the Koreans was the decision of the President of the Federal Republic of Nigeria conveyed to them in a letter from the Federal Ministry of Energy, dated January 8, 2009.

In the said letter, FG voided the allocation of OPLs 321 and 323 to KNOC on the basis that KNOC and its Consortium failed to fulfil certain terms and conditions of the award and restored the rights of ONGC/Owel Petroleum Consortium as the original winners of the two blocks in the 2005 bid round.

ONGC/Owel Petroleum Consortium had taken steps to pay the signature bonus in full as stipulated by the letter until the consortium received information that the KNOC had approached the Federal High Court, Abuja sometime in March 2009, to seek redress and an injunction restraining the relevant Federal Government agencies from giving effect to the content of the January 8, 2009 letter.

The ONGC/Owel Petroleum Consortium had to hold back the payment of the signature bonus pending the outcome of the case in court.

The ONGC/Owel Petroleum Consortium had, as gathered, previously caused a bank guarantee for the full payment of the signature bonus to be issued by the State Bank of India in favour of the Federal Government of Nigeria.

The Consortium had to recall, at great cost, the bank guarantee when the blocks awarded were withdrawn and re-allotted to KNOC in 2005 on the basis of its prior right of first refusal, due to some non-bid related downstream obligations made by KNOC, which it failed to comply with, in addition to its failure to comply with the terms of the bid.

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