Conveying the decision of the federal government to NPA, the Attorney General of the Federation (AGF) and Minister of Justice, Mallam Abubakar Malami (SAN), in a letter dated September 27, 2017 to the Managing Director of the NPA, Ms. Hadiza Bala-Usman, said that the agreement, which has allowed Intels to receive revenue on behalf of NPA for 17 years, violates the Nigerian Constitution, especially in view of the implementation of the Treasury Single Account (TSA) policy of government.
Based on the directive to terminate the agreement, Intels which was founded over three decades ago by Mr. Gabriele Volpi, an Italian national who also has Nigerian citizenship with substantial interest by former Vice President Atiku Abubakar, stands to lose several millions of dollars in commissions for the monitoring and supervision pilotage services it handles on behalf of NPA on Nigerian coastal waters.
To ensure the safety of ships’ passage within Nigeria’s seaports, the NPA, through Intels as its agent, provides pilotage services to guide ships into and out of the ports.
The rule of thumb in the maritime industry is that pilotage must be compulsory for all ships of 35 metres overall length or greater unless a valid Pilotage Exemption Certificate is held by the ship’s master.
In return for the service, ship owners/companies are required to pay a pilotage fee, which Intels collects on NPA’s behalf and retains 28 per cent of the revenue as commission for the services rendered.
However, with the memo written by the AGF, a copy of which was obtained exclusively from the justice ministry, Intels would no longer be allowed to provide the service.
Drawing the attention of Bala-Usman to the illegality of the agreement, Malami made it expressly clear that the agreement violates Sections 80(1) and 162(1) and (10) of the constitution, and wondered that the parties – NPA and Intels – did not avert their minds to the relevant provisions when they were negotiating the agreement in 2010.
Section 80(1) of the constitution states: “All revenues or other moneys raised or received by the Federation (not being revenues or other moneys payable under this Constitution or any Act of the National Assembly into any other public fund of the Federation established for a specific purpose) shall be paid into and form one Consolidated Revenue Fund of the Federation.”
Section 162(1) states: “The Federation shall maintain a special account to be called ‘the Federation Account’ into which shall be paid all revenues collected by the Government of the Federation, except the proceeds from the personal income tax of the personnel of the armed forces of the Federation, the Nigeria Police Force, the Ministry or department of government charged with responsibility for Foreign Affairs and the residents of the Federal Capital Territory, Abuja.”
While sub-section 10 of the same section states: “For the purpose of subsection (1) of this section, ‘revenue’ means any income or return accruing to or derived by the Government of the Federation from any source and includes: (a) any receipt, however described, arising from the operation of any law; (b) any return, however described, arising from or in respect of any property held by the Government of the Federation; (c) any return by way of interest on loans and dividends in respect of shares or interest held by the Government of the Federation in any company or statutory body.”
In the letter titled: “Request for Clarification of Conflict Between Executed Agreement and Federal Government Treasury Single Account Policy,” the attorney general said: “I refer to your letter dated 31st May 2017, ref: MD/17/MF/Vol.XX/583 in respect of the above subject matter wherein you sought clarification on the legal issues implicated by the continuous implementation of the Managing Agent Contract Agreement dated 11th February 2010 executed between the Nigerian Ports Authority (NPA) and Intels Nigeria Limited for the provision of boats pilotage operations, in the light of the Federal Government of Nigeria’s Treasury Singe Account (TSA) policy.
“Upon my review of your letter under reference and the relevant agreements, I have been able to conclude inevitably that the terms of the agreement as agreed by parties and the dynamics of its implementation which permits Intels to receive revenue generated on behalf of NPA ab initio, clearly violates express provisions of Sections 80(1) and 162(1) and (10) of the 1999 Constitution of the Federal Republic of Nigeria, 1999 (as amended). It is thus curious that parties did not avert their minds to the above provisions of the constitution whilst negotiating the agreement.
“The inherent illegality of the agreement as formed has since been expounded by the TSA policy issued by the Head of Service of the Federation on behalf of the Federal Government of Nigeria directing all ministries, departments and agencies to collect payment of all revenues due to the federal government or any of her agencies through the TSA.
“The objective of the presidential directive (TSA policy) in exercise of the executive powers of the president under Section 5 of the 1999 Constitution (as amended) was in furtherance of the spirit and intent of Sections 80 and 162 of the constitution and to aid transparency in government revenue collection and management.
“NPA being an agency of the federal government is bound by the TSA policy and has not howsoever been exempt therefrom. Due to the constitutional nature of the TSA, where there is a conflict between the TSA and the terms of the agreement, the TSA shall prevail.
“Therefore all monies due to the NPA currently being collected by Intels and any other agents/third parties on behalf of NPA must henceforth be paid into the TSA or any of the sub-accounts linked thereto in the Central Bank of Nigeria (information of the account will be communicated in due course) in accordance with the TSA policy.
“For the avoidance of doubt, the agreement for the monitoring and supervision of pilotage districts in the Exclusive Economic Zone of Nigeria on terms inter alia that permits Intels to receive revenue generated in each pilotage district from service boat operations in consideration for 28% of total revenue as commission to Intels is void, being a contract ex facie illegal as formed for permitting Intels to receive federal government revenue contrary to the express provisions of Sections 80(1) and 162(1) and (10) of the 1999 Constitution of the Federal Republic of Nigeria (as amended), which mandates that such revenue must be paid into the Federation Account/Consolidated Revenue Fund.
“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.”
Meanwhile,The management of Nigeria’s oil and gas logistics giant, Intels Nigeria Limited (INL), has kicked against the termination of its Pilotage Agency Agreement by the Nigerian Ports Authority (NPA), describing the action as “preposterous” and highly injurious to Nigeria.
Intels, in a statement made available on Wednesday, disclosed that following the letter from the Attorney General of the Federation (AGF) and Minister of Justice, Mr. Abubakar Malami (SAN), to the Managing Director of NPA, Ms. Hadiza Bala-Usman, directing NPA to terminate the pilotage agreement, NPA promptly ended the contract on Tuesday, October 10, 2017, without inviting it as the other party to the agreement for negotiation or due recourse to the terms of the agreement that specify conditions precedent before a party can exit the contract.
It was reported Wednesday that Malami had written to Bala-Usman on September 27, directing her to terminate the boats pilotage monitoring and supervision agreement that the agency had with Intels, saying that the contract was illegal ab initio.
Malami in the said letter had stated that the agreement which had allowed Intels to receive revenue on behalf of NPA for 17 years, was in contravention of the Nigerian Constitution, especially in view of the implementation of the Treasury Single Account (TSA) policy of government.
Based on the directive, Intels which was founded over three decades ago by Mr. Gabriele Volpi, an Italian national who also has Nigerian citizenship, and former Vice-President Atiku Abubakar, stands to lose several millions of dollars in commissions for the monitoring and supervision pilotage services it handles on behalf of NPA on Nigerian coastal waters.
Drawing the attention of Bala-Usman to the illegality of the agreement, Malami made it expressly clear that the agreement violated Sections 80(1) and 162(1) and (10) of the constitution, and wondered that the parties – NPA and Intels – did not avert their minds to the relevant provisions when they were negotiating the agreement in 2010.
But in a strongly worded response, Intels said Wednesday that the termination of the agreement which was conveyed to the firm in a letter signed by the NPA boss on Tuesday, was “clearly preposterous and the consequences highly injurious” to the interests of Nigeria.
Intels said the action by NPA would force it to reconsider its multibillion dollar investment at the Badagry deep seaport in Lagos, adding that the investment would have created thousands of direct and indirect jobs for Nigerians.
It said it had invested too much in the country and if the Nigerian government was not prepared to respect the sanctity of its contract, it was ready to head to the courts to challenge NPA’s action.
Intels gave NPA seven days from Wednesday to reconsider the residual critical areas of their relationship and to agree, to the possible extent, on a common solution, failing which it shall head to arbitration.
It further divulged that the NPA was indebted to it to the tune of hundreds of millions of dollars.
In a copy of the letter signed by a Director of Intels, Mr. Silvano Bellinato, to Bala-Usman Wednesday rejecting the termination of the agreement, which was also made available to THIDAY, the company said: “With reference to your letter received on October 10th 2017, allegedly terminating the Agency Agreement between Nigerian Ports Authority (NPA) and INTELS Nigeria Ltd (INL), we formally contest the contents of the same for the reasons stated below:
“On March 15th 2017, we received your letter ref: HQ/F&A/ED/AD/INTELS/034 in which, in addition to other contents, the following points were stated:
“Nigerian Ports Authority (NPA) acknowledged a debt towards Intels Nigeria Limited (INL) in the sum of 674,767,415.00 US$ (in addition to the interests accrued in the meantime);
“NPA communicated the need to reconcile the sum of 109,000,000.00 US$ for the additional works carried out;
“NPA informed INL about the implementation to be discussed in respect of a ‘transit account’ called NPA service boat revenue collection account domiciled at one of the banks indicated by you and the related standard operating procedures (SOP);
“NPA confirmed 28% agency commission to INL and the 72% balance to be shared between NPA and INL in the ratio 30:70.
“On March 27th 2017, we replied to every point in your letter of 15th March as stated below:
“INL took note of NPA’s acknowledgement of debt;
“INL declared availability to meet NPA in order to discuss the details for the certification of the 109,000,000.00 US$ for the additional works carried out;
“INL requested for postponement of the SOP application.
“On April 19th 2017, NPA acknowledged our acceptance of NPA’s proposal in respect of 28% agency commission (already included in the existing running Agency Agreement) and in particular to the 30% – 70% split, respectively to NPA and INL, related to the 72% balance. This would imply that the 30% is to be remitted on a monthly basis to NPA while the 70% is to be applied towards reducing the indebtedness to INL.
“Regarding the TSA application, NPA reiterated the strategic importance of such a request. However it is noted that TSA was not part of the existing agency agreement between the parties.”
The company said that on May 5th 2017, it replied NPA’s letter of April 19th 2017 proposing the opening of a jointly signed account between INL and NPA in which the boat service revenues would have been directed.
According to Bellinato, “Afterwards the account holders, with relative proxies, would remit the respective portions due to the parties, being 30% in favor of NPA and 70% in favor of INL.
“In the same letter we indicated our availability to identify the bank, from among the ones indicated by NPA; regarding the reasons of our proposal we firmly reiterated the precariousness of our financial status, mainly attributable to the credits towards NPA and heavily financed by various credit institutions.
“Such circumstances rendered alternative solutions to the ones suggested by us unviable, and also taking into consideration the inapplicability of TSA to running contracts in the manner proposed by NPA.
“Clearly, deduction of entitlements due to INL from collections under the Agreement, and payment of the balance into the designated NPA account for TSA purposes, would be in compliance with the TSA policy.”
Intels maintained that the decision by NPA to terminate the Agency Agreement, which was totally unexpected in consideration of the meetings held by the parties and exchange of letters, was clearly preposterous and the consequences highly injurious to the interests of the company.
“Hence, in compliance with the Article 12 of the Agency Agreement between the NPA and INL, we hereby request you to schedule a meeting within seven days from the date of this letter, in order to analyse the residual critical areas of our relationship and to agree, to the possible extent, on a common solution.
“Should this not happen, we hereby notify you that, in accordance with Article 13 of the Agreement, we will refer the matters to arbitration, in order to safeguard our company from the significant damages and other adverse consequences that may result from this rather unbecoming decision.
“We wish to reach an amicable solution as soon as possible for this complicated matter so that we can avoid to request for the intervention of the court for the immediate payment of any amount due to us from NPA, also in light of the likely pressure for action from our banks, which we may be compelled to do, despite our unwillingness,” the company stated in the letter.
Intels also warned that the “unjustified decision” by NPA would hurt Nigeria’s international credit rating and scare away the much needed foreign direct investment.
“Among them we cannot avoid to mention Intels itself, which has planned to make the investment for the largest African port in Badagry, for an amount of several billions dollars,” the company stated.
According to Intels, “For information purposes only, we recall that on November 8th, 2013 (Art. 2.2) an agreement with the NPA has been signed binding it, without any doubt, to reimburse the investments made on its behalf at FOT Onne – Phase 4B (and also under separate agreement for Eko Support projects) with the 100% of the incomes generated through the pilotage activities, which means that repayment will be made out of the 72% to be reserved to yourselves under the SOP proposed by NPA.
“Given that, it is clear that the said agreement sets the substantial transfer of the receivable in favour of our company, which cannot be disregarded and that only a subsequent agreement as the one the parties are negotiating (70%-30%) may modify, in your exclusive interest.
“Our relationship has always been characterised by timely execution of projects undertaken on behalf of NPA as well as operational efficiency, which has variously been acknowledged by NPA.
“It is also easy for you to ascertain the regularity and timeliness of the payments made by us on a monthly basis for the lease of facilities and throughput fees, equal to an amount of over 170 million US$ since the award of the concession.
“On July 26th, 2017 a joint technical meeting was held with the aim of reconciling the credit/debit balances between our entities, confirming the amounts due to our company. On that occasion, the request to postpone the issuance of a credit note in our favour related to the interests matured on the said amount was raised, for budget and financial statement needs.
“We mention this point only to confirm, should it be required, the effective and constructive cooperation existing between our respective entities, which contrasts sharply with your decision as communicated in your letter of today (Tuesday) and makes it even more unexplainable.”