Jan 27, 2020

Effect Of United Nation's Resolution In The Oil & Gas Industry of 3rd World Countries

Before the legal regime of oil and gas in developing nations (like Nigeria), developing nations had little or no right over their natural resources as developed nations were taking advantage of the developing nations.  Eventually, developing nations could concede almost all their territories to the powerful foreigners, as obtained in Nigeria by the Colonial government in 1938 which gave Shell BP all the territories in Nigeria (357,000 square miles).

The old way of acquiring right to explore natural resources in the developing countries is through concession. Concession was the term used to describe the grant, by a state to private persons or companies, of the right to explore for, and if found, to produce oil. A concession connotes or implies a relationship between the weak and the strong. It contains an element of capitulation and the nature of a gift. The very liberal terms of the earliest concessions appear to support these points of view. The transactions appeared one-sided, between a king who knew very little about the possibilities of the commodity and was too easily satisfied with his royalty of a few gold sovereigns and the oil company; rich, powerful and knowledgeable.(1)

The term concession was therefore regarded as a transaction in which a monarch "unminded of the interests of his people, gave too much for little, and gave to foreigners who were only too eager to build a colonial system upon the grant".2

The features of the concession regime are:
• It lasts for very long duration.
• It covered a vast expanse of territory.
• The consideration of the concession to the host government was minute and ridiculous. In some instances, a bottle of Scotch whisky was said to be sufficient.

The foundation for Nigeria's mineral and mining law was laid down shortly after the Berlin Conference3 by the Petroleum Ordinance of 1889 which was followed by the Mineral Regulation (oil) Ordinance of 1907.4 These pieces of legislation therefore established the basic framework for the development of mineral mining in Nigeria.

However, after the amalgamation of 1914, Sir Lord Lugard passed the 1914 Mineral Ordinance to repeal the 1907 Ordinance and thereby making mineral mining in Nigeria a wholly British concern. Section 6(1) of the Ordinance provides:

"No lease or license shall be granted except to a British subject or to a British
company registered in Great Britain or in a British Colony and having  its
principal place of business within her majesty's dominion, the chairman and
managing director (if any) and the majority of the directors of which are British subjects"

The import of this section is ostensible; it maintains the legacy of imperialistic concession by vesting the right to search for, win, and work minerals exclusively in British subjects or companies controlled by them. 

Moreover, the natives were given no right to challenge the lessee during the currency of the mining lease agreement while the mining company retained the sole right to commence exploration of the minerals found on such land.
The 1961 Ordinance was promulgated. It would be worthy to note that the 1916 Ordinance was a reproduction of the 1914 Ordinance to the extent that it re-affirmed the control and ownership by the British Crown over mining and oil rights in Nigeria.5 However, it differed significantly from the 1914 law as it gave some considerations for the local land owners by providing for the payment of compensation to owners of properties damaged in the mining process.6 This Ordinance failed to address the problems existing of it time. About 40yrs later, the 1959 Mineral Oil Act repealed and replaced it.
After the Second World War, the devastating impact of the war had serious effects on the world powers.. They had relied so much on the developing countries. They felt that going individually will make little or no success, but going as an organization could help achieve their aim. They had to come together and look for a way forward.

The name "United Nations", coined by United States President Franklin D. Roosevelt was first used in the Declaration by United Nations of 1 January 1942, during the Second World War, when representatives of 26 nations pledged their Governments to continue fighting together against the Axis Powers. The United Nations struggled to handle the oppression of developing nations and on the other hand the interest of industrialized countries.
On 24 October 1945 The United Nations officially came into existence. In 1945, representatives of 50 countries met in San Francisco at the United Nations Conference on International Organization to draw up the United Nations Charter. 

The delegates deliberated on the basis of proposals worked out by the representatives of China, the Soviet Union, the United Kingdom and the United States at Dumbarton Oaks, United States in August-October 1944. The Charter was signed on June 26, 1945 by the representatives of the 50 countries. Poland, which was not represented at the Conference, signed it later and became one of the original 51 Member States. 

The United Nations officially came into existence on 24 October 1945, when the Charter was ratified by China, France, the Soviet Union, the United Kingdom, the United States, and a majority of other signatories. United Nations Day is celebrated on 24 October each year. 

The controversy over mineral resources was between the industrialized nations and the developing nations, while the former canvassed the idea of investor ownership and control of a state's natural resources, the latter clamored for a shift in balance of power and control of natural resources in their favour. An attempt to resolve this gave rise to the passing of the resolution conferring on member states generally the right to permanent sovereignty over natural resources. This is the United Nation's General Assembly Resolution 1803 (Xvii) Of 14 December 1962, "Permanent sovereignty over natural resources".

The principle of permanent sovereignty over natural resources otherwise known as the landmark resolution, was first raised by the Chilean delegation at the Eight Session of the Human Right Commission, when it was working on the preparation of the Draft International Covenants on Human Rights in pursuance of the General Assembly Resolution No. 455 (IV) of February 5, 1952.7

In this Resolution, the General Assembly decided to include the right of all peoples and nations of self-determination as part of the Human Rights Covenants and requested the commission to prepare a draft on the subject.8

After a long discussion, the Commission's working party agreed to include in the draft covenants the following paragraph:

"The right of the people to self-determination shall also include permanent sovereignty over their natural wealth and resources. In no case may a people be deprived of its own subsistence on the ground of any rights that may be claimed by other states".

It also decided further that, in the conduct of the full survey of the status of the permanent sovereignty of peoples and nations over their natural wealth and resources, due regard should be paid to the rights and duties of States under international law and to the importance of encouraging international co-operation in the economic development of developing countries, bearing in mind its resolution 1515 (XV) of 15 December 1960, in which it recommended that the sovereign right of every State to dispose of its wealth and its natural resources should be respected, considering that any measure in this respect must be based on the recognition of the inalienable right of all States freely to dispose of their natural wealth and resources in accordance with their national interests, and on respect for the economic independence of States.9

Historically, the principle of permanent sovereignty over natural resources is a logical outcome of the principle of self-determination which brought about the dissolution of the colonial empires after the Second World War.10 After attaining political independence, it was meaningless if foreign control endured in the economic sector all the more since for most developing countries soon realized that by political independence, their natural resources generally represented their only economic asset.

It was therefore, not surprising that the objectives which the developing countries established for their natural resources conflicted with the interests of foreign based companies protecting their usually advantageous investment conditions.11

The developing countries regarded the principle of permanent sovereignty over natural resources as inalienable, as a rule of ius cogens (compelling law), a norm accepted and recognized by the international community of states as a whole and from which no derogation is permitted unless by a subsequent norm of general international law having the same character. The effect of this proposition put forward by the developing countries is that foreign investment agreements which are inconsistent with the principle of permanent sovereignty over natural resources would lose validity in law.12

As a corollary to this resolution, member Oil nations made municipal laws governing their natural resources. The effect of the resolution in Nigeria is the enactment of section 44(3) of the 1999 Constitution of the Federal Republic of Nigeria (as amended), and the Petroleum Act of 1969. The Federal Government of Nigeria, under the leadership of President Goodluck Ebele Jonathan (GCFR), in March 2010 signed into law the Nigerian Local Content Act which aimed at promoting  industrialization  of  the  nation's  oil  and  gas  industries and  thereby improving  the economic and social well-being of citizens engaged in the industries, which is a paradigm shift from the old arrangement.
The above enactments feature some novel provisions which include, but not limited to:

• The conferment of the entire ownership and control of all petroleum in, under or upon any land to which the Act applies shall be vested in the state;
• Introduction of oil exploration license, oil prospecting license and oil mining lease;
• The emergence of National Oil company (NOC);
• Provides for operation of refineries with the licence from the Minister;
• Mandatory participation of Nigerians in the oil and gas industry;
• Mandatory training of Nigerians to be proficient in the oil and gas industry.
Flowing from the foregoing, it is evident that developing nations (Nigeria inclusive) owing to the landmark resolution now have a firm grip of their natural resources through these measures, and other measures in the Acts such state may deem expedient.
On the other hand, OPEC formed in 1960 by 5 member states which Nigeria joined in 1971, also aids member nations to have control of their natural resources and for the economic, political and social development of member nations.
In conclusion, United Nation played a vital role for the sovereignty over natural resources by 3rd world countries.

Chinedu Innocent Nwobodo (LLB, BL, ChMC)
He is an Associate under the litigation department of Chris Ogunbanjo LP, a leading commercial law firm in Nigeria which has been in existence for over five decades.
He holds a Bachelor of Laws Degree from Enugu State University and Barrister at Law Degree from the Nigerian Law School, Lagos campus. He is an Associate of the Institute of Chartered Mediators and Conciliators.

1. Lawrence Atsegbua, "Oil and Gas Law in Nigeria: Theory and practice" (Third Edition) Benin, Fifers Lane Publishers, 2012, p.36
2. Ibid.
3. 1885 Berlin Conference for the Balkanization of Africa
4. Lawrence Atsegbua, Op. Cit at 42.
5. Section 3(1) of the Ordinance provides that the entire property in and control of the minerals, and mineral oils, in under or upon any land in Nigeria, and of all Rivers, streams and water courses, throughout Nigeria, is and shall be vested in the Crown, save in so far as such rights may in any case have been limited by the express grant made before the commencement of this Ordinance
6. Section 34(1) of the 1916 Ordinance provides that the mining lessee shall pay compensation to the owner of any building, or any economic trees, or crops removed, destroyed or damaged by the lessee, his agents workmen: provided that compensation shall not be payable in respect of any building erected or trees or crop planted on land in respect of which surface rent is paid by the lessee under section 32 after the date of which such rent commences to be payable.
7. S.K Benerjee. "The Concept of Permanent Sovereignty Over Natural Resources" (1968) 8 Indian J. Int'l Law 515 @ 517
8. Ibid.
9. http://www.ohchr.org/EN/ProfessionalInterest/Pages/NaturalResources.aspx
accessed at 12:10pm on Jan., 20, 2020.
10. Benerjee, supra, note 2 at 515.
11. Lawrence Atsegbua, Op. Cit, at 306
12. Ibid, at 313