Constitutional Pitfalls in BOFIA 2020

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Factual Pursuit of Truth for Progress

 

By Omogbemi Adelagun. Esq

No doubt, the new Banks & Other Financial Institutions Act (BOFIA 2020), which repeals the BOFIA 1991 and came into being on November 12 2020, came with a number of laudable initiatives (among others), in order to strengthen the banking sector in Nigeria;

  1. Establishment of Special Resolution Funds for Banks
  2. Entrenchment of Systemic Crisis Management for the sector
  • Supervision and regulation of FINTECHs
  1. Increase in the sanctioning power of the CBN Governor in order to tighten the belt of regulatory oversight in the sector etc.
  2. Establishment of a Special Court to deal with debts recovery cases etc.

Notwithstanding the laudable moves and other forward-looking provisions inherent in this new Act, quite shocking was the apparent lack of professional scrutiny as revealed by what appears to be a hubristic disrespect for the Constitution. I call it ‘hubristic disrespect’ because at this level of legal knowledge and legal experts’ pervasiveness in Nigeria as well as globally, one would not expect any business sensitive law to be passed without a diligent awareness and consideration of the relevant provisions of the Constitution, especially constitutional provisions that bother on fundamental human rights and jurisdiction of the Courts.

It has been observed in a similar paper by the presenter of this paper how CAMA 2020 and Finance Act 2020, concerning their provisions on Unclaimed Dividends, had committed a grave constitutional blunder by failing to properly consider Section 44 of the 1999 Constitution which deals with property rights and powers of the government to forcefully acquire interest in any moveable or immovable property on ground of public interest. For example, Section 432 of CAMA 2020 provides that Unclaimed Dividends above 12 years shall move to the distributable reserve of the Company, to be shared by other shareholders of the Company; while Section 39 of the Finance Act 2020 provides that Unclaimed Dividends above 12 years with respect to public companies shall move to the Unclaimed Dividends Trust Fund to be held in trust and maintained by the Federal Government of Nigeria. It was submitted that these provisions of CAMA 2020 and Finance Act 2020 will surely be exposed to a quantum of legal controversy and flood of litigation, given the fact that none of both Acts can be held to have clear constitutional backing in furtherance of Section 44 of the Constitution.

In fact, the Independent Association of Shareholders of Nigeria (ISAN) have condemned the provision of the Finance Act on Unclaimed Dividends and argued that dividends were private wealth of investors, either individuals or corporate entities and that the conversion of private wealth to Federal Government revenue is a violation of the right to own property/assets, as guaranteed by the 1999 Constitution. According to the Association, dividends, including unclaimed dividends, are funds generated by private companies and can be regulated by each Company’s MEMART. There are already good structures around this position. The government only needs to enhance the structures rather than legislating obnoxious laws.

Not to stray from this paper’s focus, let us look at similar dangerous if not a more dangerous constitutional pitfalls which this paper critically observes in the new BOFIA 2020:

  1. Establishment of a Special Court for Loans Recovery – Usurpation of the Jurisdiction of the Federal High Court:

Section 102 of BOFIA 2020 establishes a Special Court to be known as the Special Tribunal for Recovery and Enforcement of Eligible Loans. This is a welcoming development given the incurable recalcitrance of bank debtors in Nigeria and the conspiratorial willingness of their lawyers to use technical litigation tactics to delay speedy disposal of recovery cases.

According to BOFIA 2020 in its section 127, the Tribunal shall have the same status as that of the State or Federal High Court while appeals from the Tribunal shall lie straight to the Court of Appeal. The effect of this provision is that the Tribunal is not a mere administrative tribunal but will operate as a superior court of record.

This provision however is an aberration of the 1999 Constitution because constitutional powers and jurisdiction of the Court cannot be usurped, whittled down or taken away by an ordinary Act of the National Assembly except by constitutional amendment. Section 25 of the 1999 Constitution clearly and exclusively empowers the Federal High Court to adjudicate on any disputes or issues relating to Banks or arising from the operations of BOFIA (except disputes relating to bank and individual customer which could also be adjudicated in state high courts). The Court of Appeal per Saulawa, J.C.A in the case of Christopher Okeke Vs SEC & Ors SC.325 (2012) (2016) NGSC 69 had this to say:

“… the exclusive jurisdiction conferred upon the Federal High Court, under Section 251 (1)(e) & (r) of the 1999 Constitution as amended cannot be whittled down or taken away by an ordinary Act of the National Assembly, in the absence of any amendment to the provision in question.

The case of Nospetco Oil & Gas Ltd Vs Olorunnimbe (2011) JELR 47092 (CA) is also instructive in this regard. The Court of Appeal was to determine which Court (whether the Investment & Securities Tribunal established by the Investment & Securities Act or the Federal High Court established by the Constitution) has the requisite jurisdiction to entertain claims against Federal Government agencies wherein the validity of their executive decision to freeze the account of the appellant was being challenged.

In considering the provisions of Section 251(1) of the Constitution vis a vis Section 284(1) & (2) of the Investment & Securities Act (ISA) 2007, the Court came to the conclusion that the Federal High Court and not the Investment & Securities Tribunal was the Court with requisite jurisdiction to entertain the matter. In the words of the Court,

“… No matter how laudable and practical the intendment of the Investments and Securities Act is, its provision cannot override the provisions of the Constitution donating exclusive jurisdiction to the Federal High Court when the Federal Government or any of its agencies is being challenged over any executive or administrative action it too”.

The Nigeria 1999 Constitution like any Federal Constitution is hinged on the Supremacy of the Constitution. It is clearly provided in the Constitution that any provision of an Act or Statute that contradicts or is inconsistent with any provisions of the Constitution shall be void to the extent of its inconsistency. It is therefore submitted that sections 102, 127 and other relevant sections of the BOFIA 2020 with respect to the establishment of a Special Tribunal for recovery of loans is inconsistent with the clear provisions of the 1999 Constitution.

  1. Establishment of a Special Resolution Fund – Precluding/Limiting the Powers of the Judiciary:

While the establishment of a Special Resolution Fund for Banks by BOFIA 2020 is laudable, Section 93(2) of the BOFIA 2020 disallows the issuance of injunction or similar orders against the Fund or its assets. It also disallows issuance of execution or attachment against moneys in the credit of the Resolution Fund. Section 93(3) further makes it impermissible to subject the Fund, its Board, officials or agents to any action, claim or demand by or liability to any person in respect of any act or omission done in good faith in execution of any power or function.

No doubt, these provisions risks being set aside by the Court for being in violation of Section 6(6)(a) and (b) of the 1999 Constitution which guarantees the right of access of every citizen to the Court. The BOFIA sections clearly preclude and/or limit the judicial powers conferred on Courts by the Supreme Constitution of Nigeria as well as prevent right of access to the Court. Such provisions will be held as clearly inconsistent with the provisions of the Constitution – AMCON Vs Shittu – Appeal No: CA/L/1266/2019; NNPC Vs Fawehinmi (1998) 7 MWLR (Pt 559) 598 at 612E-F; Njikonye v MTN Ltd (2008) All FWLR (Pt 413) 1343 at 1369A-1369B.

A visible constitutional blunder committed by BOFIA 2020 in this regard is with respect to its attempt at also strengthening legal cover and immunity for the officials of the Fund Board and even for those of the Central Bank (CBN) in the respective performance of their duties by providing that no litigation, claim or demand by or liability to any official in respect of any act or omission done in good faith in execution of any power or function under BOFIA. Can we then literally say that officials of the Fund Board and the CBN are now above the Law?  That sounds legally incredible of course.

In the light of the contents and arguments of this paper, the following moves are strongly recommended:

  1. An amendment of the Constitution with a view to recognizing the powers and jurisdiction of the Special Tribunal for recovery of loans as contained in Section 102 and 127 of the BOFIA 2020.
  2. Amendment and proper rephrasing of Section 93 and other allied provisions of BOFIA 2020 that appear to preclude or limit the powers of the Court as well as immune CBN officials from legal prosecution and judicial scrutiny.

Omogbemi Adelagun is a notable Corporate Writer and Corporate Counsel Doyen in Nigeria

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