Injunctional Bias: Like Sanusi, Like Diezani?

 

With conflicting media reports, it is unclear whether or not the minister of petroleum resources, Diezani Allison-Madueke actually did it. However, there was news of her obtaining an injunction against the federal house of representatives, restraining them from investigating allegations that she spends considerable sums of state funds maintaining private jets for her personal use.

 

Now, mainstream social media (perhaps mainstream Nigeria, even) has a slight but very palpable anti-federal government bias. This may or may not be justified, but that is hardly the point. So, news of her having obtained this injunction has been greeted with derision at Diezani and frustration at the Nigerian judiciary. Watchers on the pro-government side of things have however pointed out what they perceive to be inconsistent criticism, as ousted/suspended/retired governor of the Central Bank, Mallam Lamido Sanusi, was congratulated when he obtained a similar injunction a few weeks ago. Are the Sanusi and Allison-Madueke injunctions one and the same? I do not think so. Why?

 

Well, according to information on its own website, the FRC “is a federal government agency established by the Financial Reporting Council of Nigeria Act, No. 6, 2011.  It is a federal government Parastatal under the supervision of the Federal Ministry of Industry, Trade and Investment. The FRC is responsible for, among other things, developing and publishing accounting and financial reporting standards to be observed in the preparation of financial statements of public entities in Nigeria; and for related matters.” The enabling Act also suggests that the FRC is strictly concerned with developing, setting and enforcing accounting financial reporting standards.

Does the FRC have the power to investigate for financial misappropriation? [CORRECTION] Hmmm. The enabling Act entitles the FRC to investigate “any complaint or dishonest practice, negligence, professional misconduct or malpractice, made against any professional.” The FRC also has the power to summon the professional being investigated. Who then is a “professional” for the purposes of the FRC Act? The Act seems to use “professional” interchangeably with “professional accountant” (see the sections on registration), so I would suggest that the FRC’s power to investigate is limited to professional accountants who have not conducted themselves properly in their audit/financial reporting. I do not think its powers of investigation of the FRC, as drafted, extend to investigating financial misappropriation. In any event, the courts will rule on whether the CBN governor’s suit against the FRC on the 12th of May.

 

So, in my opinion, Sanusi’s injunction was ostensibly to stop a federal agency from arrogating questionable powers to itself or overreaching itself. At the very least, the FRC’s power to investigate a CBN governor is questionable. Agreed?

 

On the other hand, the constitution establishes, unequivocally, that Houses of Assembly have the power to investigate (a) any matter over which it has power to make laws; (b) the conduct of affairs of any person or agency charged with administering its laws or disbursing money it has appropriated.

 

But the constitution does not stop there. It goes on to say that the foregoing powers are only exercisable for the purpose of enabling the National Assembly to (a) make or amend laws; and “(b) expose corruption, inefficiency or waste in the execution or administration of laws within its legislative competence and in the disbursement or administration of funds appropriated by it.”

 

Dear friends, does the National Assembly have the power to investigate allegations of corruption or misappropriation of funds against a minister of a federal government ministry in respect of which the Assembly makes laws and appropriates funds? I think so.

Is there any basis for courts to grant an injunction to restrain the National Assembly from investigating a minister? Oh yes! If their investigation is neither for the purpose of aiding the legislative process nor for exposing corruption, etc., then yes, the National Assembly would be acting outside its constitutional bounds.

 

Is this investigation concerned with exposing corruption and waste? The answer, my friends, is blowing in the wind…

 

 

Aereo and the Disruption of Public Broadcasting

Aereo Logo

Startup and tech buffs love disruption, and for good reason too. Technology has intervened, over the course of human development, to change existing business models and sometimes make them obsolete. Usually, after some initial resistance, the market follows the disruption and old businesses either [try to] adapt, like Blockbuster or close shop and move on, like Kodak Film.

 

The US Supreme Court is about to rule on the legality of the attempt of a company named Aereo to disrupt conventional free-to-air television broadcasts. Aereo offers its users a service through which they can watch live TV online for a monthly subscription of $8-$12. The TV broadcasters, whose content Aereo offers, are upset because Aereo has not obtained licenses to rebroadcast their content and they are convinced that this is clear piracy. Their sentiment is underscored by the existing lucrative situation, where cable and satellite companies pay huge sums to TV broadcasters to retransmit/rebroadcast popular shows. This is where the impact of the disruption will be felt, should the Supreme Court rule Aereo’s business to be legal.

 

Aereo's Antennas. Photo Credit: Washington Post

Aereo’s Antennas. Photo Credit: Washington Post

The case turns on whether or not Aereo’s transmissions to subscribers are “public performances” or “private performances” of the TV broadcasts. If we revisit our Copyright 101 notes, we will remember that broadcasts are eligible for copyright protection and one of the implications of this is that the copyright holder has the exclusive right to control how they are transmitted/communicated to the public. What is the difference between public and private performances? Well, there isn’t a rigid distinction, but generally, private performances fall within the realm of family, home viewing, of a non-commercial nature. Anything outside that would probably be a public performance.

 

There is also a judicial precedent (i.e. a previous decision of the Court of Appeals) which will come into focus during the presentation of arguments at the Supreme Court; the Cablevision case. “Cablevision involved a cable company that held licenses to transmit live copyrighted programs, but also sought to offer subscribers an unlicensed service known as a “Remote Storage Digital Video Recorder” (RS-DVR).” [Quote is from the US Solicitor-General’s amicus brief (opposing Aereo) to the Supreme Court, in the Aereo matter. Full brief can be found here.]

Aereo AntennaAereo2

The RS-DVR allowed subscribers to record programs for later viewing, with the recordings stored in central servers housed and maintained by Cablevision. The courts ruled that the RS-DVR transmissions were private, rather than public performances, for various reasons, including that the transmission from the RS-DVR could only be received by one subscriber.

 

That factor, the capability of reception by a sole subscriber, is central to Aereo’s business model and legal arguments. The US Solicitor-General in fact suggested in his brief that Aereo engineered its business model around the Cablevision decision. So how does Aereo work?

 

Aereo has a central hub of “thousands of dime-sized antennas that are rented to individual users.” [See more in article from Time here.] The antennas capture live free-to-air TV signals, with each antenna serving no more than one subscriber at a time, depending on what program the subscriber chooses to watch. Aereo believes that a ruling that its business is piracy would have serious implications for cloud computing and would throw the Cablevision precedent out of the window. The District and appeal courts have agreed with Aereo so far. However, one of the judges at the Court of Appeals dissented.

 

According to the judge, Judge Denny Chin, in his dissenting opinion, [full judgement available here) Aereo’s technology platform is “a sham”. He says the system has been “over-engineered in an attempt to avoid the reach of the Copyright Act and take advantage of a perceived loophole in the law.” To my mind, he provides a great example of how the system is a sham. In spite of Aereo’s seemingly innocuous position that it provides users with a technology platform to make and access unique private recordings, Aereo’s antennas broadcast the Superbowl live (and simultaneously) to 50,000 users. It would indeed be curious for this not to be held to be public broadcasting.

 

The Judge goes further to distinguish Aereo’s case from Cablevision, with the key point that Cablevision involved a company that already paid license fees, while Aereo pays none. The subscribers in Cablevision already had the ability to view the recorded transmissions; Aereo’s do not. Aereo is functionally a cable company, doing what cable companies typically do, except for its attempt to avoid getting licenses to rebroadcast programming.

 

However, many legal scholars support Aereo, according to the previously referenced TIME piece. One such scholar is quoted as saying “Aereo simply provides an antennas for viewers to privately transmit free over-the-air broadcast television signals. It does nothing more than make it easier for viewers to access already free broadcast service.” But, I would counter, this (i.e. that the broadcasts are free-to-air) is irrelevant to the underlying intellectual property rights and what non-copyright holders have the power to do.

 

I am not an American qualified lawyer but I believe that Aereo’s business should be held illegal. It is clear that their thousands of dime-sized antennas, rather than a single large receiver, is a less-efficient way to structure the business. And, while taking advantages of loopholes in laws is legal and loopholes are in fact the bread and butter of many wealthy lawyers around the world, I agree with Judge Chin that there are enough differences between Aereo and Cablevision to hold that Cablevision does not apply here.

 

We watch and observe.

 

A Judicious Judiciary

Professor Charles Debatista, in his Carriage of Goods and International Trade classes, would always remind us that the wheel on which all trade, domestic and international, turns is the principle of pacta sunt servanda – that promises must be kept. If I do not have the confidence that you will uphold your end of a bargain, or that there is a reasonably quick recourse for me in the event of your default, there is no logical reason why I should enter into a commercial relationship with you.

One of the very first questions intending international investors or their lawyers ask in pre-incorporation due diligence is “Do Nigerian courts uphold agreements freely entered into by Nigerians with non-Nigerian parties?” Typically, the question that would follow is “If yes, how long does it take, on the average, for lawsuits for the enforcement of contracts to be concluded?” It was very easy then, to casually respond that the average lifespan of a suit at the court of first instance is 3-5 years, with appeals to the Court of Appeal and the Supreme Court lasting another 2-3 years each, on the average. The math is hard to ignore, however. You could very easily be in court for 10 years trying to get someone to keep his end of a bargain. And even if you had 10 years to fritter away, there are no guarantees that you would be able to afford to keep paying your lawyer for that long.

The negative consequences of a judiciary with this speed of enforcing contracts are quite a few. I have previously retold here how an employer dared his expatriate employees to go to court to claim the 6 months’ arrears of salary he was owing them. Even though they had fixed contracts for 2 years, on the basis of which these workers relocated to Nigeria, this employer called their bluff. Unable to afford the cost or time of a trial, one by one they slunk back to their respective countries. However, this was even on a relatively small scale. An investor bringing in, say, $300million dollars wants to know how quickly he can cut or recoup his losses in the event that his Nigerian partners default on their obligations.

In addition to anecdotal evidence of the consequences of a slightly sluggish judiciary, empirical studies, as reported here (Doing Business – Enforcing Contracts 2013) and here, show that a judiciary that resolves commercial disputes in a timely and cost efficient manner is crucial to a healthy economy. The studies suggest that “countries with slower judicial systems, on the average, have less bank financing for new investment” and that “financial intermediates are likely to reduce the amount of lending if the ability to collect on debts is no longer given or obtaining control over property as collateral to secure loans is denied.” The latter part of the preceding sentence is evident here in Nigeria, where the consensus amongst small business owners is that it is extremely difficult to obtain affordable finance or credit from banks for their businesses.

Table culled from the Doing Business Report

Speeding up the judicial process will also be critical to resolving at least 2 current front-burner issues – corruption in government and the lack of respect for the Rule of Law. The chairman of the Economic and Financial Crimes Commission was recently reported to have expressed frustration with the ability of high profile (political/government) suspects to delay their trials. His lack of faith in the country’s judiciary is shared by the millions who would rather exact summary justice on suspected robbers or rapists than hand them over to the authorities to be investigated and charged.

Nigeria is ranked 87th out of 185 countries in ease of enforcing contracts and 8th most improved since 2005

Speedier prosecutions would lead to many positives. Wrongly accused persons would no longer waste half their lives away in police and prison cells awaiting trial. Public officials would be deterred from stealing public funds because there would be less time to manipulate (or be perceived to be manipulating the system).  The confidence of citizens in the judiciary would also be restored.

So how do we accelerate the dispensation of justice? Let us take a look at Singapore, ranked the easiest country in the world in which to enforce contracts (download data here and sort in descending order) and, coincidentally, also the best country for doing business. In this speech by one of its Justices of the Supreme Court in 2009, the history of the country’s judicial system is recounted, along with the steps taken to reform it and expedite the resolution of civil cases. To summarise, Singapore did the following:

  • Appointed more judges
  • Changed rules of court to empower courts to be more proactive in the management of cases
  • Denied adjournments
  • Gave hearing dates to moribund cases
  • Expanded jurisdiction of subordinate courts (e.g., in the Nigerian context, magistrate and customary courts) in terms of subject matter and size of monetary claims
  • Set and maintained target timelines and benchmarks, for example –
    • Seek to dispose of all cases within 18 months of filing
    • Seek to dispose of more cases than are filed every year, disposing of a number equivalent to 104% of cases filed in 2007)

In Nigeria, Lagos State is easily at the forefront of judicial reform, especially with the appointment of judges and the expansion of the jurisdiction of subordinate courts. Lagos State judges are also mandated by current civil procedure rules to encourage parties to a dispute to settle prior to a full hearing. However, courts in Lagos are still very congested, indicating that there still might not be enough judges. We are provided with an idea of what would be an acceptable ratio of judges to the population in this article on litigation and delays in the Indian judiciary. The article reports that as far back as 1987, the country’s Law Commission had recommended a ratio of 107 judges per million citizens. It is instructive that while India was planning (in 1987) to achieve this target by 2000, the USA had already achieved it in 1981. Another piece, also from India, compares India’s judges per 100,000 to the ratio in “well-administered” countries. The information is reproduced in the table below.

Country No. of Judges/100,000
USA 11
Sweden 13
China 17
Belgium 23
Germany 25
Slovenia 39
India 1.2

What, then, is the current ratio of judges to Nigerian citizens? I spent over an hour trawling through various judiciary websites and even the site of the National Statistics Bureau, with no luck finding out the number of judges (including customary court judges and magistrates) that we currently have in Nigeria. But, making assumptions, on the premises explained below, I reckon we have about 4,000 -5,000 “judges” at the very maximum.

The Supreme Court currently has fewer than 15 justices out of a constitutional maximum of 21 but let us assume a full court. There are currently roughly 70 justices of the court of the court of appeal but let us assume a bloated estimate of 100 judges for both courts. There are also roughly 70 judges of the Federal High Court. Each state has a State High Court. If we use Lagos as a benchmark, with roughly 50 judges per State (an unreasonably high estimate given that there will be several States nowhere near as busy as Lagos, but you’ll soon see where I’m going with this), that is 1850 state High Court judges for all the states and Abuja. This gives a total figure of 2,020 judges. If we then doubled the figure to accommodate judges of the National Industrial Court, judges of the customary court and the customary court of appeal, as well as magistrates, we would have an estimate of roughly 4,000. Thus, even if we assumed a figure of 5,000 judges for a population of 160 million people, the ratio is 31 judges per million individuals (or 3.1 per 100,000), approximately a third of the Indian and American ‘optimum’. The argument for more judges however, needs to be counter-balanced with the need to ensure that the integrity (not in the context of ‘honesty’ – see speech here where the former Chief Judge of Nigeria remarks that expanding the size of the Court of Appeal has led to conflicting judgements) of the system isn’t compromised or lost.

I realise that the references from which my conclusions concerning the judiciary have been drawn were primarily focused on civil proceedings but I see no reason why the same measures cannot be applied to the congestion in the criminal justice system as well. I realise too, however, that the criminal justice system also includes the police. On police reforms, I will again refer readers to the most comprehensive discussion of which I’m aware on the subject, here.

The government has taken many measures to convince foreign investors that Nigeria is a good destination for their money. The Minister of Trade has introduced accelerated the process for obtaining business visas, while the Minister of Aviation also recently announced an investment road-show. The government can give as many assurances as it wishes but it is clear that reducing the speed at which the wheels of the judiciary roll will be one of the most significant steps that will be taken.