In 1995, the Federal Government of Nigeria set up a panel which was headed by Chief Denis Odife, to undertake a comprehensive review of the operations of the Nigerian capital market, in line with international best practices and standards; hence, the panel came up with the drafting of the Investment and Securities Act (ISA) 1999 which was promulgated on 29th May, 1999 (ISA 1999). One of the far-reaching recommendations embodied in the Act was the conception and establishment of the Investment and Securities Tribunal (IST). The Act empowered the tribunal to resolve disputes and controversies that may arise by operation of the Act and rules made there under. Section 284 of the Investment and Securities Act gives the Investment and Securities Tribunal exclusive jurisdiction over securities matters. The Commission however retained its power to administratively adjudicate on complaints arising from transactions in the capital market as well as breaches of the provisions of the Act and the rules made there under. Decisions of the Administrative Proceeding Committee (APC) in accordance with the Act are now subject to appeal to the IST. Appeals on the IST’s judgment/rulings lie to the Court of Appeal and from there to the Supreme Court.
However, conflict ensues between the Federal High Court and Investment and Securities Tribunal on appropriate judicial forum to litigate and adjudicate securities disputes. It is the law that securities matters are captured under the Exclusive Legislative List, and by provisions of section 6 (5), 251, 252, and 272 of the 1999 Constitution, the Federal High Court is given the adjudicatory power over securities disputes.
The impacts of this conflict have been so devastating to the entire Nigerian capital market and the economy in general. This conflict of jurisdiction has led to judicial forum shopping by securities litigants, conflicting decisions from the superior court, decline in investors’ confidence and poor assessment of ease of enforcement of contract in Nigeria.
The focus of this paper is to painstakingly examine these judicial institutions vis-a-viz their adjudicatory powers over securities disputes, identify and interrogate the problems of adjudicatory conflict, highlight the lacunae in the laws and proffer recommendations to resolve the conflict.
Statement of the Problem Identified by the Paper
The Federal High Court Act 2004 establishes the Federal High Court in contemplation of section 6 of the 1999 Constitution (as amended) as a superior court to adjudicate on securities disputes. Similarly, the Investment and Securities Tribunal is a creation of the Investment and Securities Act 2007 which confers on it power of a superior court to also adjudicate on securities disputes. Hence, conflict of jurisdiction status exists between the Investment and Securities Tribunal and the Federal High Court.
Judicial forum shopping by litigants in different adjudicatory windows such as Administrative Proceedings Committee, Investment and Securities Tribunal or Federal High Court continues to weaken enforcement of securities contract, uncertainty in the Investment and Securities Act 2007 regarding the judicial structure of the Investment and Securities Tribunal entraps the IST under the Executive rather than Judiciary, conflicting decisions from the superior courts and legislative inertia of the National Assembly weaken the integrity and confidence of investors..
Specific Objectives of the Paper
The specific objectives of this research are to
(a). highlight the areas of conflict between the Investment and Securities Tribunal and the Federal High Court in respect to the status of the IST;
(b). interrogate the judicial forum shopping by securities litigants;
(c). appraise the conflicting decisions of the superior courts in securities disputes;
(d). interrogate uncertainty in the Investment and Securities Act 2007 regarding the judicial structure of the Investment and Securities Tribunal; and
(e). examine the legislative inertia of the National Assembly in resolving the conflict
Research Questions of the Paper
The research questions distilled from the problems identified are
(a). can the Investment and Securities Tribunal not being contemplated by the 1999 Constitution exercise exclusive jurisdiction over securities disputes?
(b). is judicial forum shopping by securities litigants not a mockery of our judicial architecture?
(c). is placement of IST under the supervision of the executive not amounted to uncertainties in the principle of separation of power and descent to militarization of securities market?
(d). would maze of conflicting decisions of superior courts on securities disputes not cause anarchy, litigant’s self-help? and
(e). would legislative inertia in amending securities law by the National Assembly not result in lack of investor confidence?
Justification of the Paper
The conflict of jurisdiction between the Investment and Securities Tribunal and the Federal High Court is monumentally declining the growth of the Nigerian securities market as investors both local and foreign are reluctant in committing their investment pool into the Nigerian capital market. It is therefore expedient to articulate the inconsistency between the Federal High Court and Investment and Securities Tribunal and suggest the ways out to attract investors back to Nigeria.
Clarification and Definition of Terms
In the interest of thematic appreciation of the research, the words: ‘Criminal Jurisdiction, Impotence and Securities Court are described to shed foundational light of the subject matter. Critiquing is an art of careful judgment in which opinion about the good and bad parts of something. In the light of this paper, a well researched analysis of the dispute of jurisdiction between the Investment and Securities Tribunal and Federal High Court. Dispute is defined as questioning or denying the accuracy or validity of a statement. Securities market is defined as a place where medium and long-term finance can be raised. It is “a network of specialized financial institutions, series of mechanisms, processes and infrastructure that, in various ways facilitate the bringing together of suppliers and users of medium and long term capital for investment in economic developmental projects”. Jurisdiction is defined as power of a court to hear and decide a case. According to Black’s law Dictionary, jurisdiction is “a court’s power to decide a case or issue”.
Adjekughele in his article perfunctorily highlighted the IST and its statutory functions without examining its constitutional validity. Authors like Akume questioned the constitutionality of the IST, but fell short of proffering any justification for the variation of term of office and qualification for membership of the IST vis-à-vis that of the Federal High Court and the effect of the variation to the resolution of disputes in the capital market. Udora on the other hand justified the establishment of the IST on the premise of the overriding powers of the legislature to make laws.
Ogbuanya, another securities expert opined that the status of the Investment and Securities Tribunal (IST) remains a legal conundrum. He said, ‘allowing such sensitive securities issues to the adjudication of the Tribunal without clear independent from SEC, would not ensure structural fair hearing as envisaged under the Constitution. However, the author did not specify nor recommend the ways of reforming the IST in conformity with legitimacy and the Constitution.
Anthony Idigbe in his foraging reasoned that the combined readings of section 237 (3) of the ISA, sections 6 (5) (a)-(i) and 315 of the 1999 Constitution (as amended), the IST is inclusive of the Courts recognized by the grundnorm and by consequence; it is a legitimate judicial forum to litigate securities matters. That is, Idigbe reasoned that the Federal High Court and the IST are both superior and coordinate courts
Another securities scholar, Joseph E.O. Abugu in his work, though appreciated the legislative piece that created the IST, pointed to the fundamental flaw of its unconstitutionality. He said such exclusive jurisdiction given to the Tribunal by ISA ….is a manifest inconsistency and absurdity in the light of the constitutional jurisdiction of the Federal High Court. It is elementary that the ISA is pro tanto void to the extent of the inconsistency. The constitution is a superior law to statute. The learned author therefore advocated for modifications as may be necessary to bring it into conformity with the provisions of the Constitution.
In the judicial case of FIS Securities Ltd v Securities and Exchange Commission, the High Court held that the Tribunal has jurisdiction to deal with matters specified in the Companies and Allied Matters Act, 1990, in so far as it deals with quoted companies’ securities and transactions in those securities, whereas the Appeal Court removed such powers from the IST and the Court saw the Tribunal as jurisdictional interloper with garb of judicial transgression. In SEC v. Ajayi, the Court of Appeal only confirmed the exclusive jurisdiction given the IST by the Investment and Securities Tribunal without clarifying the IST’s inconsistency with section 6 of the Constitution,
The Court of Appeal in S.E.C v Kasunmu had this to say that: Section 242 of the Investment and Securities Act which states that save as provided elsewhere in the Act, no civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the tribunal constituted under the Act is empowered by or under the Act to determine and that no injunction shall be granted by any Court or other authority in respect of any action taken or to be taken in pursuance of any power conferred on the Tribunal by or under the Act, cannot oust the constitutionality guaranteed jurisdiction of the Federal High Court. This research work will further enrich other literary works when the above lacunae are practically canvassed with their attendant recommendations.
Establishment the Federal High Court
The 1999 Constitution (as amended) together with the Federal High Court Act provides for the establishment of the Federal High Court in Nigeria, appointment of its members, jurisdiction, powers, constitution and practice and procedures of the Court as an autonomous court. The essence of this position is that the Federal High Court is not bound by any territorial jurisdiction. The Federal High Court breaches state boundaries and reaches across borders to exercise its jurisdiction and efficiently deliver its functions
Jurisdiction of the Federal High Court
The Federal High Court has both the civil and criminal jurisdictions. Considering the compass of this paper, civil jurisdiction of the Federal High Court is captured in section 251 (1) of the 1999 Constitution as follows:
“Notwithstanding anything to the contrary contained in this constitution and in addition to such other jurisdiction as may be conferred upon it by an Act of the National Assembly, the Federal High Court shall have and exercise jurisdiction to the exclusion of any other court in civil causes and matters:
(e) Arising from the operation of the Companies and Allied Matters Act or any other enactment replacing that Act or regulating the operation of companies incorporated under the Companies and
Generally, the Federal High Court has exclusive trial jurisdiction over any action or proceeding for a declaration or injunction affecting the validity of any executive or administrative action or decision by the Central Bank Nigeria, Corporate Affairs Commission, and Securities and Exchange Commission as federal agencies. Specifically, the Federal High Court has exclusive jurisdiction in civil causes and matters arising from the operation of Bank and Other Financial Institution Act and (or) connected with or pertaining to banking, including a banker customer dispute. The Court also has exclusive jurisdiction in civil causes and matters arising from the operation of Companies and Allied Matters Act or any other enactment regulating the operations of companies incorporated under CAMA.
In effect, the Federal High Court has a disjunctive exclusive jurisdiction over matters arising from CAMA on the one hand, and (or) matters arising from other laws (such as the Investment and Securities Act (ISA) that regulate the operations of companies. Skenconsult (Nig.) Ltd v Ukey supports this interpretation. It is a Nigerian authority for the proposition that the Federal High Court has exclusive jurisdiction on matters arising from CAMA. Then the position of the Constitution has not changed, even though, the case was decided when CAMA, then known as the Companies Act of 1968, was the only law regulating incorporation of companies and dealings in companies’ shares. The grundnorm retains its touchstone of validity today as far as the appropriate judicial forum for securities disputes is the Federal High Court.
However, with the enactment of the Investment and Securities Act, and the resulting removal of dealing in securities, from CAMA, it is arguable if Skenconsult remains a strong authority for the exclusive jurisdiction of the Federal High Court on matters, which were formerly contained in the 1968 Act. The question is whether with the creation of the Investment and Securities Tribunal the Federal High Court’s exclusive jurisdiction still extends to matters arising from the Investment and Securities Act
Historical Brief of the Investment and Securities Tribunal
The Investment and Securities Tribunal (IST) is a specialized fast tracked Tribunal for the resolution of disputes arising from investment and securities transactions. The Tribunal is specially funded from the Nigerian annual budget through its parent body, the SEC.
This is evidently clear that the major financial source of the Tribunal as captured in sub section (2) (a) of the Investment and Securities Act from the recurrent expenditure as passed by the National Assembly in the annual budget of the nation. The budget of the Tribunal and the SEC are subheads in the amount allocated to their parent Ministry (Ministry of Finance) in the annual budget. Hence, the appointments, removal and retirements of the Investments and Securities Tribunal’s members and Chairman are made by the Minister of Finance regardless of the fact that the functions of the Tribunal are adjudicatory and by implication, the Tribunal is supposed to be regulated by the National Judicial Council.
Legal crisis has emerged among the legal writers, securities lawyers, securities experts and legal pundits on fair dispensation of justice and impartiality of the Tribunal being an appendage of the Executive particularly the Ministry of Finance, not even the Ministry of Justice.
The Jurisdiction of the IST
The Tribunal given its extant section 284 of ISA has jurisdiction, original and appellate, to interpret and adjudicate on all capital market and investments civil disputes. It reads:
There is established a body to be known as the Investments and Securities Tribunal to exercise the jurisdiction, powers and authority conferred on it by or under this Act.
From the above provisions, it is clear that the IST has jurisdiction over matters involving the Securities and Exchange Commission (SEC). This is where most legal minds have vilified the Investment and Securities Act (ISA) with respect to the IST. First, the SEC is an agency of the Federal Government and as such the implication of Section 251 (r) of the 1999 Constitution is to the effect that the Federal High Court has jurisdiction over it. Secondly, the IST is not structurally autonomous from the SEC itself and in such situation how can one guarantee structural fair hearing. These raise serious arguments that will be thoroughly attempted by this paper. Section 295(1) of ISA provides that any,
person dissatisfied with the decision of the Tribunal may appeal against such decision to the court of appeal if:
The decision was taken in the exercise of its appellate jurisdiction, on points of law only; or It is a final decision taken in the exercise of its original jurisdiction, on points of law; or mixed law and fact; or It is an interlocutory decision of the tribunal, on points of law only.
As noted above there is a right of appeal from the decisions of the IST to the Court of Appeal as pontificated by the Act. Practically, most matters before the IST comes under its appellate jurisdiction because investors’ are usually required to lay their complaints first with the SEC, and the SEC onward channels the complaints to the Administrative Proceedings Committee (APC). When the APC gives its decision, then there is room for appeal to the IST.
Conflict of Jurisdiction between the Federal High Court and Investment and Securities Tribunal
Jurisdictional conflict between judicial fora is often a common issue in countries that use a mix of specialist and regular Courts to resolve civil and criminal cases like Nigeria. The conflict between the Federal High Court and Investment and Securities Tribunal has attained the crescendo and esoteric plane considering arguments among lawyers, securities experts, legal pundits, maze of conflicting judicial authorities and forum shopping by securities litigants.
This paper in trying to crystallize areas of conflict between the Federal High Court and Investment and Securities Tribunal, has distilled five (5) questions which shall be painstakingly examined.
(a).Can Investment and Securities Tribunal not being Contemplated by the 1999 Constitution Exercise Exclusive Jurisdiction over Securities Disputes?
The 1999 Constitution remains the grundnorm in Nigeria and its supremacy remains sacrosanct and inviolate as reproduced from the supremacy Section 1(1) and (3), to wit:
(1) This Constitution is supreme and its provisions shall have binding force on all authorities and persons throughout the Federal Republic of Nigeria
(3) If any other is inconsistent with the provisions of this constitution, this constitution shall prevail, and that other law shall to the extent of the inconsistency be void
Almost two decades since the enactment of the Investment and Securities Act, the controversy surrounding the parallel jurisdiction of the Federal High Court and Investment and Securities Tribunal in respect of civil matters arising from the operation and application of the ISA appears far from being settled. It is against the foregoing that the IST is analyzed with a view to ascertaining the legal status of the Tribunal vis-à-vis the provisions of the Constitution. It is therefore important to interrogate the inconsistency in the status of the IST with the Constitution in order to proffer suggestions to bring it in conformity with the letter and spirit of the Constitution.
Therefore section 284 of the Investment and Securities Act which sought to give exclusive jurisdiction to the IST regarding matters mentioned therein may be said to be in direct conflict with the 1999 Constitution, and will therefore be found to be ultra vires. Since we have indicated, and rightly too, that the Constitution is supreme and that any law that is inconsistent with its provisions is void to the extent of the inconsistency, therefore section 284 of ISA which provides that:
“… the Tribunal shall, to the exclusion of any other court of law or body in Nigeria, exercise jurisdiction to hear and determine any question of law or dispute involving securities matters”
This needs to be reviewed.
The reason is simply that as a provision of a subordinate legislation, section 284 of the ISA needs to be reviewed to bring it into conformity with the provisions of the Constitution by allowing the High Courts have Jurisdiction to entertain matters under the ISA or allow appeal from decision of the IST to be remitted before the Federal High Court. Secondly, it is trite that a statute (not the constitution) cannot create a body or court/tribunal and exclude another court created by the constitution (whose jurisdiction is specified in the constitution) from inquiring or adjudicating on matters specified in the jurisdiction of the court/tribunal that is a creature of a mere statute.
Also, since the Federal High Court has exclusive jurisdiction in matters “arising from the operation of the Companies and Allied Matters Act (CAMA) or regulating the operation of companies incorporated under CAMA, it is difficult to draw a line between capital market matters and “operation of companies incorporated under CAMA”. Most importantly, it must also be mentioned that section 6(4) (b) of the 1999 Constitution has lent credence to the argument that the jurisdiction of the IST should have been subordinated to the jurisdiction of the High Court and the Federal High Court. This is because section 6 (5) (b) provides as follows:
Section 6(5) (b) nothing in the foregoing provisions of this section shall be construed as precluding the National Assembly or any House of Assembly from establishing Court, other than those to which this section relates with subordinate jurisdiction to that of the High Court.
Therefore section 295 (1) of the ISA which provided for “any person dissatisfied with a decision of the tribunal” to appeal against such decision to the Court of Appeal in spite of what the Constitution provided in sub-section (5) (b) of section 6 above (since the IST refuses to be a subordinate jurisdiction to the Federal High Court) may be said to be in conflict with the Constitution. If tested in court, this conflict may be resolved in favour of the supreme law of the land – the Constitution.
(b).Is Judicial Forum Shopping by Securities Litigants not a Mockery of our Judicial Architecture?
Judicial forum shopping has splintered into dissonant doctrinal silos. The primary purpose is to confuse the judges thereby creating a situation of anarchy where judges in the Court give conflicting ruling/judgment. The adjudicatory system in the Nigerian capital market is replete of forum shopping by securities litigants who play harlotry to circumvent the judicial system and hoodwink the progress of securities market. The pertinent question is what can be the reason or justification for the institution of securities litigation involving the same subject matter by one party before several judges and different courts? The answer may not be far-fetched considering the statutes guiding the operation of the market, dispositions of the market players and judicial characterizations.
Litigants have continually faced the problem caused by forum shopping between the Federal High Court and the Investment and Securities Tribunal over capital market disputes. This is because of the inherent problem with the jurisdiction conferred on the Federal High Court and the Investment and Securities Tribunal by law. The provisions of Section 284(1) ISA which confers the Tribunal with jurisdiction over capital market disputes and over disputes arising from the operations of the Act are in conflict with Section 251(1) of the Constitution as explained before.
For ease of comprehension, the subsection will be broken down into 3 parts, viz: i. civil causes and matters arising from the operation of the Companies and Allied Matters Act; ii. civil causes and matters arising from the operation of any other enactment replacing that Act; iii. civil causes and matters arising from any enactment that regulates the operation of companies incorporated under the Companies and Allied Matters Act.
The ISA by section 263(1)(d) of the Investment and Securities Decree (as it then was) repealed part XVII of the Companies and Allied Matters Act (CAMA) (comprising sections 541-623). Part XVII covers “Dealings in Companies Securities”. By virtue of this repeal, dealings with Companies securities are no longer dealt with in the Companies and Allied Matters Act but in the Investment and Securities Decree, now the Investment and Securities Act. Essentially therefore, the ISA has replaced a part of the CAMA (Part XVII). Hence, the civil causes and matters that arise from this enactment (ISA) which has replaced a part of CAMA are within the jurisdiction of the Federal High Court going by the second break down of section 251(1) of the Constitution as seen above.
Again, even if it is argued that the ISA has not replaced CAMA but only a part of it, it is difficult to also remove the business of the tribunal from the purview of causes and matters arising from an enactment that regulates the operations of companies incorporated in Nigeria. Going by the nature of investment disputes earlier discussed, it is obvious that investment disputes arise from the operations of participants in investments. These include capital market operators, investors, a securities exchange or capital trade point or clearing and settlement agency, a self-regulatory organization, an issuer of securities and disputes arising from the administration, management and operation of collective investment schemes.
Although it is arguable that these matters aside from the last (administration, management and operation of collective investment schemes) do not relate to the operation of companies incorporated under the CAMA, the non issuance of share certificates for instance could be the subject matter of a capital market dispute, yet it is provided for in section 146 CAMA, hence a cause or matter arising from the operation of CAMA. It is rather obvious that there can be no capital market dispute that does not arise from the operation of the Companies and Allied Matters Act.
A dispute between a company (issuer of security) and the commission, for instance in relation to false statements contained in a prospectus is as directly related to a company as it can be. The point in essence is that none of the provisions contained in Section 294 ISA can be said not to relate to companies in any way. These are matters that evolve from the operations (issue of securities) of a company and therefore lie at the Federal High Court and not at the IST.
Again, assuming without conceding that the jurisdiction of the tribunal has not been affected by the provision of section 251(1)(e) of the Constitution of the Federal Republic of Nigeria, how does one explain the exclusion of the operation of Section 251(1)(r) with regards to the disputes involving the commission as provided in section 284(1)(b)( e). Section 251(1)(r) provides as follows:
Notwithstanding anything to the contrary contained in this Constitution and in addition to such other jurisdiction as may be conferred upon in it by an Act of the National Assembly, the Federal High Court shall have and exercise jurisdiction to the exclusion of any other Court in civil causes and matters (over)
(r). any action or proceeding for a declaration or injunction affecting the validity of an executive or administrative action or decision by the Federal Government or any of its agencies.
The Securities and Exchange Commission is without doubt, a Federal agency. Clearly, an application for a declaration or injunction on the decision of the Administrative Proceedings Committee which has now been approved and adopted as a decision of the Commission [under section 284(1)(b)( e)] ISA falls within the ambit of section 251(1)(r) of the Constitution since it will amount to an application for a declaration or injunction against a decision of an agency of the Federal Government.
Clearly, the Securities and Exchange Commission which is established by an Act of the National Assembly guards the operations of securities in Nigeria. It was formerly a department of the Central Bank of Nigeria, later became an arm of the Ministry of Finance and currently a body of its own established by an Act of the National Assembly and charged with duties relating to securities. It is, by all means, an agency of the Federal Government of Nigeria. The case of Nospetco Oil & Gas ltd v Olorunnimbe is instructive in this regard. The Court was to determine the Court with requisite jurisdiction to entertain claims against Federal Government agencies wherein the validity of their executive decision to freeze the account of the appellant was being challenged. In considering the provisions of Section 251(1)(p)(q) and (r) vis a vis Section 284(1) & (2) of the ISA 2007, the Court came to the conclusion that the Federal High Court was the Court with requisite jurisdiction to entertain the matter. In the words of the Court,
“… no matter how laudable and practical the intendment of the Investments and Securities Act, its provision cannot override the provisions of the Constitution donating exclusive jurisdiction to the Federal High Court when the Federal Government or any of its agencies is being challenged over any executive or administrative action it too”.
Considering the foregoing, one can only begin to marvel at the provision of the ISA on the exclusivity of the jurisdiction of the IST. This uncertainty in jurisdiction has promoted forum shopping among capital market litigants and has hindered the achievement of the goals of establishing the Tribunal. It has become detrimental to the growth and development of the securities industry.
(c). Is Placement of IST under the Supervision of the Executive not amounted to Uncertainties in the Principle of Separation of Power and Descent to Militarization of Securities Market?
The legal basis for the establishment of the IST by the ISA can be found in Section 6(5) (j) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) (“CFRN”) which vests judicial powers of the Federation in such other courts as may be authorized by law to exercise jurisdiction on matters with respect to which the National Assembly makes laws. It is undisputable that the ISA is an Act of the National Assembly and the IST being a tribunal established by an Act of the National Assembly has quasi constitutional sanction to enhance administrative justice on matters coming before it in the ISA. IST’s decisions should be subject to supervisory review of the Federal High Court and then to appeal if necessary.
Some legal scholars have questioned the legality of the Executive control of the Investment and Securities Tribunal (IST). The statutory subornation of the IST under the supervisory activism of the Executive is unconstitutional and usurpation of judicial powers conferred on the Judiciary by Section 6 (5) of the 1999 Constitution. The inconsistency cannot stand because, in the dictum of Chief Justice Griffith …any attempt to vest any part of the judicial power … in anybody other than a court is entirely ineffective and nugatory, and particularly in securities clime such executive meddlesomeness is set to destroy the market and that must not be allowed in a democratized securities market.
Proponents against the assertion that the Tribunal is part of the Commission have questioned the fairness of the hearing in the Tribunal over matters that the Commission is involved in since it will be a case of the Tribunal sitting over its own cause where the dispute is one of those provided for in Section 284(1) (b) (e): for example, a dispute between the Commission and an SRO, capital market operator, investor or an issuer of securities. It is based on this premise that a proposition was made for the severability of some of the items contained in Section 294 so that those that directly relate to companies and of which structural fair hearing cannot be guaranteed will be heard by the Federal High Court while those other matters that do not relate directly to companies and for which structural fair hearing can be said to be guaranteed will be heard by the tribunal.
(d).Would Maze of Conflicting Decisions of the Superior Courts not Cause Securities Anarchy and Litigant’s Self-Help?
The cases of Ajayi, Okeke, and Nospecto are the three conflicting decisions of the Court of Appeal on basically three issues such as: the competent adjudicatory forum for the trial of securities matters; the competent forum for the trial of mixed cases in which the SEC has initiated enforcement proceeding; and (in Ajayi, and Okeke) the extent to which an APC proceeding can be invalidated on the grounds of natural justice.
Analysis of Ajayi v SEC (2007) LPELR-CA 200
This appeal against the order of Nyako J. of the FHC, Lagos Division was decided on two grounds, namely: whether the trial judge was right in law, to hold that the Investment and Securities Act (ISA) conferred exclusive jurisdiction on the IST in respect of matters relating to the operations of the Act; and whether the trial judge should have quashed the APC’s decision, on the Appellant’s allegation and that it violated the rules of natural justice. The CA unanimously (per Peter-Odili JCA with Adekeye and Aboki JJCA concurring) held inter alia that the proper forum for an appeal against and (or) challenge of a decision of the APC, is the IST and not the FHC; that the IST’s statutory jurisdiction to hear such an appeal is not shared with the FHC; and that the later court correctly declined jurisdiction.
The reasoning behind this judgment was that Section 224(1), 234(1) and 361(1) of the ISA together, conferred an exclusive jurisdiction on the IST to adjudicate on matters arising from the Act and its jurisdiction, is not concurrent with the FHC. The Appellant had contended that the FHC had jurisdiction to entertain an appeal from the APC, on the footing that the applicable section 236(1) of the ISA, 1999, states that a person who is dissatisfied with any action or decision of the Commission under the Act may institute an action in the Tribunal or appeal against such decision within the period stipulated under the Act. The Appellant construed this provision to suggest that an action can be filed before the IST and appeal could be lodged with the FHC.
This paper, with due respect to the learned judges ‘decisions, arguably faults the judgment as inconsistent having strained interpretation, which is contrary to the statutory scheme of the ISA, 1999 and by extension, of the ISA, 2007, to exclude the FHC, from the resolution of disputes arising from securities regulation. Peter-Odili JCA was in my opinion therefore wrong to reason that the provision cannot be interpreted to permit an appeal from a decision of SEC to go to the FHC. This paper reasons, a fortiori, that though the ISA intended that appeal from the decision of APC be remitted for conclusive decision of the IST, but two questions which challenge this submission are readily addressed shortly. Firstly, whether the IST (being an Administrative Court under the supervisory role of SEC) invested with original and appellate jurisdiction on securities matters brought before it can guarantee impartiality (fair hearing) which is the gravamen and principle of natural justice to all parties.
Secondly, whether the IST has the constitutional legitimacy and jurisdictional clearance of superior court to determine securities matters, and whether, as it is, the IST can decide securities matters exclusively without remitting its judgment at the FHC. It is the position of this paper that the Court of Appeal should have allowed the appeal and directed the FHC to assume the jurisdiction brought before it by the appellant. Before addressing the two questions, this paper observed that: It is a notorious fact and as was indeed argued for the appellant that SEC should be impleaded before the FHC as Federal Agency, this argument is with respect sustainable.
This argument remains sacrosanct to impeach the defective special jurisdictional clause in the ISA, relating to the exclusive adjudicatory remit of the IST over the decisions of SEC. This should, as a rule, be interpreted as stone cast purview of constitutional jurisdiction of the FHC .
Anytime the decision and reasoning of the Court of Appeal in Ajayi is followed as precedent in securities matters of the same fact, to wit: impleading SEC before the IST for a decision arising from the ISA clearly, the IST’s and FHC’s jurisdictions will always come into direct conflict. To avoid this, it is submitted therefore that in so far as it has been shown that a regulatory decision and (or) determination of the SEC, is wrongly and incurably rooted in the ISA, the FHC and not the IST ought to have the trial jurisdiction over disputes resulting therefrom until IST is constitutionally invested as a special court with superior and coordinate jurisdiction as the FHC.
Nospecto Oil & Gas Ltd v Olorunimbe & 15 Ors
In this appeal against a ruling of the IST, the parties submitted five identical issues for determination. Two of these issues are relevant to the focus in this paper: (a) whether the agreement between the parties is a simple or a collective investment scheme contemplated by sections 153(1), 284(1) (f) and 315 of the ISA, 2007, as to confer jurisdiction on the IST; and (b) whether the IST has the jurisdiction to hear the case.
Appellant’s argument on the two issues were essentially a rerun of the arguments in support of its preliminary objection before the IST. These briefly, were to the effect that the agreement was a simple contract, which should be litigated before the competent State High Court, consistent with section 272 of the CFRN, 1999; and that by seeking reliefs against SEC and CBN, the 1st to 14th Appellants, cannot come before the IST. This is because section 251(1) of the CFRN, 1999, confers jurisdiction on the FHC, in a matter, such as the instant where federal agencies are impleaded for their administrative actions. These arguments are balance, in that the appellant in one breadth argued the matter before the IST was a simple contract which is within the jurisdictional remit of the SHC and in another, for the FHC. This arguably exemplifies sound legal reasoning where the law is certain to the facts of the case.
Ideally, it should be quite easy for litigants to know the competent trial forum for a dispute arising as here, from solicitation of investment from the public, but where jurisdictional principles are not so clearly formulated, jurisdictional challenge founded often on equivocatory arguments, tend to take up the greater part of dispute resolution process to the detriment of merit of the case. The Respondents (Appellant’s investors) contended that the Appellant was ‘estopped’ from re-characterising the agreement as a simple contract in view of the decision of the IST in Nospecto v SEC, to the effect that the Appellant’s business was effectively a collective investment scheme – a judgment, which they argue, the Appellant did not appeal.
The CA (per Ogunwunmiju JCA, with Pemu and Danjuma JJCA concurring) resolved the first issue in favour of the Appellants, to the effect that the agreement, subject matter of the appeal, was a collective investment scheme over which the IST has trial jurisdiction. Ogunwunmiju JCA reasoned that CAMA does not confer any right on a company to approach the public with collective investment schemes. Consistent with the reasoning of this paper, it is submitted that her Ladyship was right in holding that the dispute between the parties arose from a collective investment scheme. In support, it is arguable that solicitation of investment from the public, through an agreement, as was done by the appellant, cannot to a convincing extent, be pleaded as a simple contract. Even if it were at all, a contract, it should be seen as one with regulatory implication in securities and investment law.
However, the trial forum should not have been the IST but the high court, being the superior court and federal court constitutionally empowered to hear matters involving securities of which market and regulatory body are controlled by the federal as evidenced in the “Exclusive List”. As canvassed above, ISA remains a creation of crisis that lacks constitutional validity, and every statutory instrument not in conformity or inconsistent with the grundnorm “shall to the extent of its inconsistency be void”.
Okeke v SEC & 2 Ors
On whether the jurisdiction conferred on the Federal High Court can be whittled down or taken away by an ordinary Act of the National Assembly (the Investment and Securities Act) the Court of Appeal per Saulawa, J.C.A in the case of Okeke v SEC & ors44 had this to say:
“… the exclusive jurisdiction conferred upon the Federal High Court, under Section 251 (1)(e) & (r) of the 1999 Constitution as amended (supra) cannot be whittled down or taken away by an ordinary Act of the National Assembly, in the absence of any amendment to the provision in question.
Undoubtedly, the 1st Respondent (and by extension the 2nd Respondent) is an agency of the Federal Government within the purview of Section 251 (1) (r) of the 1999 Constitution (supra). And by the well set out, and rather unequivocal provisions, of Section 251 (1) (r) (supra), the Federal High Court shall have and exercise jurisdiction, to the exclusion of any other Court, in civil causes and any action or proceeding for a declaration or injunction affecting the validity of any executive or administrative action or decision by the Federal Government or any of the agencies thereof.”
Therefore, concerning the matters in section 254(1)(b)( e), they cannot be rightly instituted at the IST because of section 251(1)(r) as has just been elucidated and 251(1)(e) as had been explained. Again, section 7(7) of the Federal High Court Act has provided that any jurisdiction conferred by the Act on any other Court shall be subject to the provisions of the Constitution. The Section provides as follows:
(7) Any delegation to hear and determine any Federal causes or matters conferred by any Federal enactment shall be read with such modification to conform with the provisions of the Constitution of the Federal Republic of Nigeria, 1999 and the provisions of this Act.
Specifically, the point (obita) by Saulawa JCA that the exclusive jurisdiction of the FHC in section 251 (1) (e) (r) ‘cannot be whittled down or taken away by an ordinary Act (ISA) of the National Assembly in the absence of any amendment to the provision’ is a sound ratio, in the sense of insisting that an amendment to section 251 (1) must necessarily be contained within that section. This is just as sound and valid as arguing that a court or tribunal established by the National Assembly pursuant to section 6 (4)(a) of the CFRN, 1999, must be reflected in the judicial hierarchy, contained in Chapter VII of the Constitution before such a court can be regarded as a superior court simplicita.
(e).Would Legislative Inertia in Amending Securities Law by the National Assembly not Result in Lack of Investor Confidence?
The 1999 Constitution empowers the Legislature to make law for the good governance of the country and such law must constantly reflect the modern operations and transactions of the country. It is posited that an efficient and effective capital market is the foundation of any meaningful and sustainable economic growth. The efficiency and effectiveness of the capital market however depends on the robustness of its legal and regulatory framework. It has become trite that the nation’s capital market is the pillar of its economy. However, where there is no articulate and sound dispute adjudicatory mechanism investors are reluctant in committing their huge investments into such market. The provisions of the Investment and Securities Act 2007 (ISA) and the Rules and Regulations of the SEC as well as the other capital market related rules prevalent in Nigeria cannot in themselves achieve investor protection amidst fundamental and material defects contained in the ISA regarding the IST’s jurisdiction and status.
The Investment and Securities Act (ISA) 1999 was one of the rushed legislative piece passed into law at the twilight of the regime of General Abdulsalam Abubarkar. The ovation that greeted the legislation then has far dwindled amidst its criticism. The inelegancy, coercive tones and material errors evidenced in the legislation particularly on the dispute resolution clauses in the Nigerian capital market are apparently identified defects. Although some amendments were made to the 1999 Act now ISA 2007, but the architectural structure and adjudicatory forum of the Investment and Securities Tribunal are soaked in controversy and no legislative solutions have been proffered till date. Hence, the investors and capital market operators do not understand the laws and rules applicable to them neither could they predicate the consequences of their actions and properly order their affairs on the operations of the market. They are living on uncertainties.
No sooner had the Investment and Securities Act been passed into law than controversy surrounding the status, jurisdiction, funding and independence of Investment and Securities Tribunal became evident, particularly on the controversy surrounding the appropriate jurisdiction between the Federal High Court and Investment and Securities Tribunal on capital market matters.
The grave consequences of the jurisdiction dispute canvassed are: loss of hard earned securities investments by investors, lack of synchronized securities jurisprudence independent and advanced from the common law principles, further decline in World Bank ease of enforcing contract in Nigeria, exodus repatriation of investments from Nigeria, increase in securities breach of contract and investment crimes
Summary of Findings
The following findings are distilled from the interrogations of the researched problems that:
(a). the exclusive jurisdiction granted to the Investment and Securities Tribunal by ISA 2007 purportedly ousts the jurisdiction bestowed upon the Federal High Court by the 1999 Constitution of Nigeria.
(b). the research observed that web of adjudicatory windows created by the Investment and Securities Act 2007 such as Administrative Proceedings Committee, Investment and Securities Tribunal and Federal High Court, has caused serial judicial harlotry or judicial forum shopping by securities litigants who approach favourble judicial forum to get desired judgment. These multiple windows created become pawn in the hands of scheming litigants who leverage on the statutory weakness to circumvent securities justice and subvert sound securities adjudication.
(c). it was also observed that certain provisions in the Investment and Securities Act are characterized with uncertainties. The Investment and Securities Act 2007 subjects the Investment and Securities Tribunal under the supervisory authority of the Executive. The parent ministry, Ministry of Finance is empowered by the Act to appoint, remove, and pay salaries of the Panel Members of the Investment and Securities Tribunal. This is contrary to judicial supervisory characteristic where the National Judicial Council oversees the activities of the Nigerian Judiciary.
(d). it has been observed that maze of conflicting judicial authorities by superior Courts of Appeal over the appropriate judicial forum to litigate securities disputes have continued unabated. These conflicting decisions of the Appeal Courts have heightened the jurisdiction controversy between the Investment and Securities Tribunal and the Federal High Court. The fear in the heart of securities litigants is that going to the Tribunal to get justice amounts to voyage of inanity. The litigants see the securities adjudicatory window as a waste of money, time and that precious investment transactions are tied down by the superior courts that leave the litigant more confused than they first came.
(e). it is observed with dismay that the Investment and Securities Tribunal which has spanned almost twenty (20) years has neither been amended or re-enacted to incorporate modern securities adjudicatory system practicable in advanced economies of the world. The legislative inertia of the National Assembly has continued to ridicule our securities law(s) in the comity of nations. Worse still is the fact that the Nigerian 1999 Constitution has been amended three (3), yet the Investment and Securities Tribunal has not been captured among superior courts listed in section 6 of the grundnorm.
- Alteration of the Constitution of the Federal Republic of Nigeria, 1999 to reflect the establishment of the Investments and Securities Tribunal under the Constitution; and for related matters
In drawing the IST from the dispute of superficial and quixotic exclusive jurisdiction solely conferred on it by the Investment and Securities Act without constitutional imprimatur, there is a need for constitutional amendment particularly of Sections 6 (5) and 81 of the 1999 Constitution as amended to include the Investment and Securities Tribunal (IST) among the superior courts and conferred on it all the rights, functions, privileges and benefits enjoyed by the Federal High Court outlined in Section 81 of the 1999 Constitution.
The supremacy of the Nigerian 1999 Constitution is sacrosanct and must be maintained to avoid anarchy especially economic or business anarchy because the wealth of any nation is the fountain of its strength and such strength derives from the seamless operation of the constitution. In fact, in deferring to the unarguable superiority of the Constitution, there is express and mandatory support by the provision of the Investment and Securities Tribunal thus:
Apart from the Constitution of the Federal Republic of Nigeria, if the provisions of any other law, in relation to capital market matters including the enactments specified in subsection (1) of this section, are inconsistent with the provisions of this Act, the provisions of this Act shall prevail and the provisions of that other law shall, to the extent of the inconsistency, be void
The need for this urgent constitutional imprimatur to guarantee the superior status of the IST is now.
New Legislation Capturing Independence of the Investment and Securities Tribunal
The Nigerian securities services adjudicatory architecture needs a radical copy of the UK system to develop a viable jurisprudence for such all important pillar of the nation’s economy. This paper suggests a single, one-stop, cross sectoral value chain securities matters adjudicatory architecture statutorily independent from the Executive interference. That is, the current situation whereby the Tribunal has been the protégé of the Securities and Exchange Commission is appalling and upon different statute legislating the Tribunal and having been recognized by the Constitution as superior court; the Tribunal will then exercise its exclusive jurisdiction over securities matters. It will divest the Federal High Court from its current overloaded jurisdiction causing unnecessary delay in adjudication of financial/securities services matters and stagnancy of development in securities jurisprudence in Nigeria.
(c).The SEC should promote Securities Arbitration and other Alternative Dispute Resolution (ADR) mechanisms
The Nigerian Securities and Exchange Commission (SEC) strengthen and amplify their Core Policy Statement on the effective use of the ADR. The promotion of ADR will enhance speedy resolution of conflicts arising in the market. This process will help free the docket of courts and will equally restore the confidence of the investors to the fact that virile platform for quick resolution of their issues is guaranteed. The SEC is advised by this Thesis to use ADR as a management tool to resolve conflicts at the early stage, in expeditious, cost effective, and mutually acceptable manner. The SEC through a well defined ADR should promote mutual understanding and expansion of the Nigerian capital market.
By and large, jurisdictional forum questions discussed in this research paper are the perceived inadequacies of the legal and institutional architecture of corporate and financial regulations, which tends to create tensions amongst regulatory agencies and judicial actors. Such tensions cannot be totally eliminated in a regulatory system, but how they are managed through a continuous reappraisal of the underlying regulatory and statutory norms and principles, will to a reasonable extent impact on the effectiveness of the prevailing regulatory approach. Managing and responding to the tensions effectively, often requires statutory and constitutional reform as centrally and frontally advocated in this research paper and a re-alignment of the institutional regulatory structure to achieve a much more effective regulation. The impact of an uncertain medium for the resolution of disputes is a great hindrance to investment.
This paper has comprehensively examined the jurisdictional conflict between the Investment and Securities Tribunal and the Federal High Court and the attendant consequences on enforcement of securities contract in Nigeria. This paper serves as a background The paper has also made some far reaching recommendations and if implemented will change the phase of securities jurisprudence for good and cause a radical investor confidence and influx of investors’ portfolios into the Nigerian capital market.