On Intels and the NPA

The purported termination of the Intels pilotage contract by the Nigerian Ports Authority, further to advice from the Attorney-General of the Federation has generated a lot of debate, for a number of reasons. Some commentators have expressed happiness at the toppling of what they refer to as a “monopoly,” while others have voiced concern at yet another public private partnership arrangement ending somewhat abruptly. Personally, I have reservations about the justification given by the AG’s office.

In the very widely-circulated letter from the AG, sections were cited from the constitution, which require any money due to the government to be paid into the Consolidate Revenue Fund of the Federation. There was also the matter of the Treasury Single Account policy of the Federal Government and how the collection of service fees by Intels before the remittance of the NPAs violates the TSA policy and the constitution. In the AG’s words, “… In the premise of the above, the conflict between the agreement and the TSA policy presents a force majeure event under the agreement, and NPA should forthwith commence the process of issuing the relevant notices to Intels exiting the agreement which indeed was void ab initio.”

Now, I must issue a disclaimer that I have not seen the agreement in question. However, in the context of usual commercial agreements and practice, the AG’s conclusion would seem a little peculiar. First, it is very unusual for Force Majeure events, simply by occurring, to warrant termination of an agreement. For context, a Force Majeure event is one which prevents either party from fulfilling its obligations.

Agreements typically cite war, terrorism, civil unrest, industrial action, natural disasters, etc. as Force Majeure events. What agreements would typically go on to say, is that if a Force Majeure event persists such that the affected party is unable to perform its obligations for an extended and specified number of days, then the other party can give notice of termination. Even if a change in applicable law is listed in the Intels/NPA agreement as a Force Majeure event, there is still the requirement of it making it impossible for either Intels or the NPA to perform its obligations. That does not appear to be the case here.

Secondly, again with the caveat of not having seen the agreement in question, virtually all commercial agreements, including PPP agreements, have customary ‘boilerplate clauses’ in them – standard clauses which set out the more general terms of the contract, such as governing law, dispute resolution process, where to send notices, standard warranties from the parties. One of these usual clauses is the ‘severability clause’, under which the parties agree that the event of any of the objects of the contract becoming unenforceable or unlawful will not invalidate the entire contract and that they will jointly take steps to fix the irregularity.

If the supervening event of the TSA policy has made the agreed revenue sharing and remittance procedure unlawful, usual commercial terms would compel the parties to agree a new revenue model. The primary object of the contract is the provision of pilotage services and unless the constitution prohibits this, it is difficult to see how the revenue sharing portion of the contract makes the entire arrangement illegal.

Thirdly, with due respect to the AG’s office, only a court can declare a contract ‘void ab initio’ (i.e. void from the very outset). It is a judicial pronouncement that the contract was never a valid one and there are attendant consequences to it. Perhaps the comment was only made in passing however, as the letter does not instruct or advise immediate termination (which would usually follow a court holding the contract void ab initio) but only that the contractual notices of termination be given.

Finally, there’s something to be said about the average Joe’s response to a perceived monopoly as being inherently bad. Intels is apparently a “monopoly” that cannot be allowed to continue. This line of thought is a huge misconception and the sentiment is usually echoed when discussing a few other companies in Nigeria, including Multichoice, for example. A monopoly is not of itself a bad thing – in countries with competition or anti-trust regulation, it is anti-competitive and monopolistic behaviour that is frowned at.

If a “dominant company” (the more correct expression) is actively squeezing others out or its competitors by, for example, unnaturally low prices or setting artificial barriers to market entry, there’s genuinely a problem. However, the entire purpose of a public-private partnership is to grant a private entity a concession over public infrastructure, for the purpose of maximising the output of the facility and government’s revenues therefrom. To speak of a monopoly in this context is really a malapropism.