Nigeria’s highest court has stripped UC RUSAL of its ownership of the formerly state-run ALSCON and awarded it to US group BFI which bid most for the company.
“According to our information, last Friday’s ruling of Nigeria’s Supreme court neither does change, nor can change the owner of ALSCON shares belonging to UC RUSAL,” a company spokeswoman said in a statement to AFP.
“ALSCON is currently part of UC RUSAL, the smelter is operating in standard mode.”
BFI had offered a bid of $410 million for a majority stake in Aluminium Smelter Company of Nigeria (ALSCON), but Nigeria’s privatisation agency awarded the firm to RUSAL, which had bid $205 million.
The US group subsequently launched a legal challenge against the June 2004 decision, although it lost its appeals in two lower courts. But the Supreme Court ruled in BFI’s favour.
The UC Rusal spokeswoman argued that the ruling did not affect the Russian company’s ownership of ALSCON as it had been made against Nigeria’s Bureau of Public Enterprises (BPE).
“It’s for the Nigerian government to bear responsibility for such a ruling and it cannot affect RUSAL’s ownership of ALSCON shares,” she added.
A five man panel of the apex court unanimously agreed that there was a binding contract between BFIG and the BPE which should be enforced. The court also issued an order of perpetual injunction restraining BPE from inviting any further bidding for the sale and acquisition of ALSCON and awarded the sum of N50,000.00 cost against BPE.
In the lead judgment delivered by Justice Afolabi Fabiyi, the court held that UC Russal, a Russian firm which is currently running the affairs at ALSCON, should have refrained from buying the company when it was aware that BFIG which was chosen as the preferred bidder before BPE unilaterally frustrated the contract, was already in court challenging BPE’s refusal to consummate the transaction.
The court held that the BPE must be made to appreciate the purport of the doctrine of lis pendens which is aimed at preserving the subject matter of litigation. “Any extraneous body including UC Russal which buys the subject of litigation does so as its own risks.” The court maintained.
UC Russal was the second bidder whose bid sum of $205 million with conditionalities was rejected by BPE but the government agency in charge of the privatization exercise later turned round to UC Russal after accepting BFIG’s offer.
According to the court, the reason given by BPE for abandoning the contract with BFIG was most unjustified and contrary to the agreement of parties and identified the unilateral insertion of an offensive clause that the 10% bid price must be paid within 15 days of the receipt of the letter informing BFIG that it had been selected as the prefer bidder, as the crux of the dispute whereas the initial agreement was that 10% bid price should be paid within 15 working days of signing the Share Purchase Agreement while the remaining outstanding 90 per cent bid price was to be paid within 90 days.
Justice Fabiyi noted that reason given for abrogating the contract does not accord with the stipulations in Exhibit 5 –the pre-bid conference resolutions which expressly provides that payment of the initial 10% of the purchase price shall be made within 15 working days after the signing the Share Purchase Agreement.
The Supreme Court held that BPE had no power to unilaterally change the mode of payment of the 10% of the bid price.
BPE had terminated the contract when BFIG failed to pay 10% of the initial bid price within 15 days of the receipt of its letter, an act which the apex court said is unacceptable and untenable in view of the various documents tendered in court which showed the agreement between the two parties.
The court slammed the Federal High Court and the Court of Appeal for not properly evaluating the documents tendered before them before they dismissed BFIG’s case.
“The lower courts took a very simplistic view of the whole transaction from the angle of a simple contract without bearing in mind that the sale of ALSCON was by way of an auction sale in which each bid is regarded as an offer which if accepted by the auctioneer by the fall of the hammer, creates a binding and enforceable contract.”
The apex court consequently set aside the judgments of the two lower court and issued an order of specific performance which mandated BPE to execute the mutually agreed share purchase agreement with BFIG.
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