Supreme Court declares FGN revocation of KNOC OPLs 321 & 323 illegal

The Supreme Court has ruled that the decision of the Federal Government to void the allocation of Oil Prospecting Licences (OPLs) 321 and 323 to the Korea National Oil Corporation (KNOC) and re-award the oil blocks to ONGC/Owel Petroleum Consortium was illegal.

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, affirms 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.

On 24 February 2017, the Supreme Court of Nigeria, delivered its judgment in a long drawn dispute between Korea National Oil Corporation (KNOC) and some Federal Government entities[1] in respect of the Federal Government of Nigeria’s alleged revocation of KNOC’s interest in Oil Prospecting Licenses 321 and 323 (the OPLs). However the majority decision of the Supreme Court considered only a technical issue as to the mode of commencing the action,

The dispute commenced in 2009, when KNOC filed an action against the Federal Government entities at the Federal High Court of Nigeria. In the suit leading to the appeals to Court of Appeal and the Supreme Court, the Federal High Court had upheld all KNOC’s claims against the Federal Government of Nigeria and had held that the decision of the President contained in a letter of 8 January 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 (Owel) appealed 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.

The Supreme Court did not arrive at a unanimous decision. The majority decision considered the technical issue of the mode of commencement. In the lead judgment, the Supreme Court held that the matter should have been initiated by a Writ of Summons and not by Judicial Review. The substantive issues in dispute were however not considered.

In a detailed dissenting judgment of the Honourable Justice Musa Dattijo Muhammad, His Lordship noted that two courts (i.e. the Federal High Court and the Court of Appeal) have decided the real issue in controversy between the parties i.e. whether the President is competent to revoke, in the manner he did, the awards of OPLs 321 and 323 to KNOC. Of important consideration is that these two courts were unanimous in their finding that the revocation of the OPLs by the President was unlawful. This point was not considered at all in the majority decision of the Supreme Court.

In the dissenting judgment, His Lordship, Justice Muhammad also found that the decision of the Court of Appeal with regard to the mode of commencement of the action was perverse as the Court of Appeal confused non-compliance with the procedural jurisdiction for initiating a suit which is merely an irregularity, with total lack of jurisdiction. He restored the Federal High Court’s proceedings and upheld the concurrent findings of the two lower courts on the illegal revocation of OPLs 321 and 323.

Although the majority decision of the Supreme Court did not consider the substantive issues in dispute upon finding that the Federal High Court had no jurisdiction, one cannot totally disregard or turn a blind eye to the pronouncements of the Federal High Court and the Court of Appeal on the substantive issues in dispute, primary of which was, that the revocation of KNOCs interests in OPLs 321 and 323 by the President was illegal. Therefore, any purported award on the basis of the illegal revocation cannot stand and KNOC is still vested with the rights to the oil blocs.

Olusola Bello