When Segun Osuntokun received his first big Nigerian instruction some 15 years ago, people looked at him as if he had ‘two heads’, he says. Now leading London-based Berwin Leighton Paisner’s Africa group, Osuntokun runs into senior partners of other international law firms on pretty much every flight in and out of Lagos. With a reputation for corruption amid a growing threat from terrorism, Nigeria is not for the faint-hearted. Yet, for UK commercial law firms Africa’s most populous country is of increasing interest as they follow existing clients, or seek new business there. Nigeria’s economy – the second largest in sub-Saharan Africa after South Africa – has continued to grow steadily, despite the global financial crisis.
The economy is benefiting from recent banking and financial reforms – many banks are now focusing on capital markets and foreign investment – and booming sectors including telecommunications and retail, fuelled by an expanding middle-class. The privatisation of the country’s power sector, a priority of Nigeria’s federal government, is adding to the investment momentum. Bayo Odubeko, corporate finance partner in Norton Rose’s Africa group practice, says: ‘Nigeria is going to be one of the largest legal services markets for international law firms in the very near future, so the fundamentals for Nigeria and therefore opportunities for Norton Rose as a law firm are significant.’
The Law Society’s head of international policy Nankunda Katangaza says a significant proportion of the UK’s top 100 law firms are doing business in Nigeria – not just the magic circle but also smaller regional practices. This trend has been bolstered by the strong historical and language ties between the two countries; Nigeria’s legal system is based on English common law. The recession is also a factor. Katangaza now receives requests from Law Society members for contacts and introductions in Nigeria. ‘That is a shift,’ she says. ‘Before that everyone just sat here and waited for instructions.’
Nigeria’s legal services market is highly regulated. Lawyers cannot practise Nigerian or any other law, including English law, in Nigeria unless they have also been called to the Nigerian bar and are Nigerian nationals. To be admitted to the country’s bar requires a one-year conversion course at the Nigerian Law School. Furthermore, Nigerian law firms are not permitted to enter into partnership, or share fees, with foreign law firms.
The Nigerian Bar Association (NBA) is examining the merits of liberalising the Nigerian legal services market, and this indicates that change may be afoot. But Gbenga Oyebode, managing partner of one of Nigeria’s top firms, Aluko & Oyebode, and chairman of the NBA Section on Business Law, says there is nothing imminent: ‘A committee is looking at the issue and it will make a recommendation to the president of the NBA [Okey Wali]. It’s one of the subjects that he wants to be further enlightened on but it is not one of the priorities. The issue of liberalisation and foreign law firms in local markets is a topical issue. It is something that we need to review, so that our legal profession keeps in line with global trends,’ he concludes. Within the Nigerian legal profession there are calls to lift some of the restrictions, though this is a controversial issue, particularly for smaller firms who fear a loss of independence.
As Dr Babatunde Ajibade SAN (senior advocate of Nigeria), managing partner of Nigerian commercial law firm SPA Ajibade, explains: ‘Liberalisation is going to happen sooner or later. We are in a globalised world and we cannot ring-fence this jurisdiction for much longer.’ But first the Nigerian legal profession needs ‘strengthening’. Firms operating in partnership are small by international standards. Aluko & Oyebode, for example, is one of the country’s largest, but only has 70 fee- earners. The majority of Nigeria’s 70,000 practising lawyers are sole practitioners, and most commercial firms have fewer than six lawyers and specialise in only one or two areas of law. With 23 fee-earners, including three partners, Ajibade’s own firm is considered a mid-size legal concern in Nigeria. ‘Nigerian firms tend to be too small to cope with some of the work that is potentially out there. There is definitely a need for consolidation,’ he says.
Olufunke Adekoya SAN notes the small size of many Nigerian commercial firms make effective competition for mandates difficult as the perception, not always correct, is that lack of internal capacity will delay response times. Adekoya is a partner of Aelex, formed in 2004 out of the merger of four Nigerian commercial firms. More robust regulation is needed too, says Ajibade, who cites the regulation of the English profession as a model to follow to ensure that Nigerian law firms provide ‘minimum standards of service to the public’. This includes basics like the use of fire-proof filing cabinets.
Oyebode is concerned that the sector’s weaknesses would not be used as an excuse for failing to face up to global competition. International investors will bring global standards in best practice, corporate governance, and more investment in training and technology, he argues. ‘These are all things that the Nigerian legal profession needs to make itself better able to bring its services to the public.’
So what are the key challenges facing law firms entering or expanding in the Nigerian market? First, the pace of the legislative process, jamming up the country’s huge potential, provides an unwelcome degree of uncertainty for foreign investors. The Petroleum Industry Bill (PBI), originally introduced in 2008, aims to reform the oil sector, upon which the government depends for some 80% of its revenues. The bill offers the promise of greater foreign investment in oil and gas exploration and production, and improved transparency in the management of the oil industry. But five years later, it is still a work in progress. For Oyebode these delays are symptomatic of Nigeria’s sluggish legislative system.
Corruption is also a big headache. In 2012 Nigeria was ranked 139 out of 176 countries in Transparency International’s Corruption Perception Index, while in the World Bank’s Doing Business Report, Nigeria was ranked 133 out of 183 economies. ‘Corruption remains the big gorilla in the room,’ acknowledges Oyebode. ‘Just as we must make sure that legislative power and capacity are enhanced, we must make sure that corruption does not play any part in our justice sector.’
Most English law firms the Gazette spoke to maintain that corruption is not deterring them from doing business in Nigeria. However, one interviewee, who preferred not be identified, says that international law firms operating in the country need to manage this risk. ‘Nigerian law firms have in the past obtained mandates, not through an objective process, but on the basis that we would not countenance. General counsel are giving out work in the expectation of getting something back from the law firms, and we are very concerned and alive as to our ability to operate in a market like Nigeria without having to deal with reputational issues,’ he says.
There is also a worrying increase in terrorist violence, particularly in northern Nigeria, where ex-pats have been kidnapped and murdered by militant Islamist groups, such as Boko Haram and other splinter groups, which have recently made the news. The Law Society’s Katangaza notes, however, that the violence is taking place in very specific areas and not in Lagos, which is the country’s legal centre. ‘Bad news stories, like kidnapping and corruption, have not made the slightest difference in terms of doing business in general,’ Katangaza says, suggesting that this may also be the case because no foreign law firm has an office yet in the country.
What have English law firms been up to? For now at least, business for UK law firms in Nigeria conducted by email, video-conferencing and jumping on a plane, where necessary, is on the up. Some of the largest UK firms including Norton Rose, Stephenson Harwood and BLP, are expanding fee income, advising multinationals and Nigerian corporates on both contentious and non-contentious commercial work under English law.
Norton Rose, which in June will merge with US law firm Fulbright & Jaworski, has been doing business in Nigeria for nearly three decades, and currently focuses on mergers and acquisitions, and financing work related to infrastructure, power and energy projects. The firm’s clients in Nigeria include pan-Africa’s Standard Bank, Ecobank Transnational Incorporated and the Lagos State Government, which the firm is advising on the new Lekki-Epe international Airport and the Red Line light rail system, a public private partnership (PPP). Norton Rose is also winning new business from the privatisation of the country’s power sector.
Stephenson Harwood’s Kamal Shah, who heads the Africa and India teams at the international firm, has been active in the Nigerian market since 2003. Shah says Stephenson Harwood has represented Nigerian banks in ‘high-profile’ fraud and asset tracing claims, with non-contentious commercial work, including corporate and project finance, and M&As in the oil and gas sector. Among the firm’s clients are Nigeria’s state oil and gas company Nigerian National Petroleum Corporation and Aberdeen-based and AIM-listed Eland Oil & Gas, which Stephenson Harwood recently advised on the purchase of an onshore oil concession from Shell.
Meanwhile, Nigerian clients of City law firm BLP include privately owned Access Bank, Nigeria’s largest bank, and the Central Bank of Nigeria, for which the international firm has acted in London’s High Court on banking and financial services disputes, as well as the Federal Government of Nigeria, which it represented in a London power plant arbitration dispute. On the transactional side, BLP is involved primarily in the oil and gas sector, acting for independents on M&A, farm-in and farm-out agreements for oil concessions in Nigeria.
Arbitration puts firms in the spotlight
Arbitration proceedings – domestic and international – have been on the increase in recent years owing to the growing interest from foreign investors who are reluctant to use Nigeria’s courts.
Lagos Court of Arbitration, established by the Lagos State Government as a private sector driven initiative, was formally launched in November last year; it signals Lagos’s ambition to claim the position of the international arbitration centre for west Africa, and possibly for the whole of the Africa region.
Berwin Leighton Paisner’s Segun Osuntokun notes that with the size and wealth of local companies growing, the choice of arbitration seat – whether in Lagos, London, Paris or New York – ‘will come down to negotiating power. My own prediction is that there will be a gradual but accelerating drift, rather than a seismic shift, to arbitration in Lagos’.
Collaboration with Nigerian firms
Along with the growing interest in the country from international firms, co-operation with Nigerian law firms is becoming more important. Getting up close to Nigerian firms is a smoother process than someone on the outside might imagine. As Norton Rose’s Odubeko notes: ‘Nigeria is not one of the legal markets where you would struggle to find a competent firm to work with.’
Over the last 10 years, the leading Nigerian firms have by and large modelled themselves on international law practices, Osuntokun adds. ‘They have specialised, they have put in place similar remuneration structures and moved away from the old, family style of two or three sole practitioners in loose federation to proper partnerships.’ This is partly because Nigerian lawyers have become familiar with best practice in the UK, having either trained or studied there. Indeed, the current trend appears to be that Nigerian nationals who trained in the UK are moving back to their country of origin to practise. Speaking at the DMJ Recruitment’s seminar on the African Legal Market in February, Mark Kenderdine-Davies, general counsel at CDC Group, says that many Nigerian firms are ‘bringing lawyers home’.
So how are UK law firms going about working with local firms? The relationships have until now primarily revolved around reciprocal referrals, and some joint training and marketing. Osuntokun says that in jurisdictions like Nigeria where BLP does not have offices, the firm follows what he calls the ‘preferred firm model’, which he says is about developing long-term relationships with a small number of firms.
Stephenson Harwood is collaborating on a deal-by-deal basis with Aluko & Oyebode and Olaniwun Ajayi, as well as Banwo & Ighodalo, among others. Shah says that, like BLP, the firm plans to narrow down the roster of local firms it works with. As it has done in other jurisdictions in Africa, Stephenson Harwood also plans to start a secondment programme with ‘one or two Nigerian firms’. Nigerian firms, noting a culture among some international firms of underrating the expertise of local counsel, welcome this, says Aelex’s Adekoya.
Society aims to cement business ties
The Law Society and a group of member law firms will join UK businesses as part of the Lord Mayor’s delegation to Nigeria from 30 April to 3 May.
While in Nigeria, the Law Society is expected to be signing a Memorandum of Understanding with the Nigerian Bar Association’s Section on Business Law, comprising Nigeria’s largest firms, focusing on corporate and commercial work. The MOU aims to boost networking opportunities and business developments between the two jurisdictions, including through networking seminars in London and Nigeria; a corporate law training programme in Lagos; and a programme of activity for Nigerian lawyers attending the Law Society’s International Marketplace conference in July.
Law Society head of international policy Nankunda Katangaza says Nigerian law firms are keen to meet with English law firms, including big international practices, on the same level. This, she says, ‘indicates the shift in terms of the size and the sophistication of the types of firms emerging in Nigeria. It signals their own ambition to go beyond being simply Nigerian firms... They are interested in working together [with UK law firms] collaboratively.’
But Nigerian and English law firms are also increasingly joining forces in bids. ‘We have done joint pitching for transactional work with UK law firms if the project is large enough and if the subject area is one in which Nigerian expertise is either lacking or inadequate,’ says Ajibade, whose firm has a ‘steady stream of work’ to and from Olswang in the telecommunications sector and Simmons & Simmons in capital markets.
In the future, relationships between UK and Nigerian firms will likely become ever more involved. ‘There will be more exclusivity in the relationship. For example, firms will not refer work to anyone else unless there is a conflict or the firm does not have the expertise to do the work,’ argues Shah. Longer-term developments, including fee-sharing and partnerships, depend on the shape and pace of liberalisation.
For certain, a strongly growing economy is producing more and bigger Nigerian companies and high-net-worth individuals who want their legal advisers close at hand. Nevertheless, international firms have indicated no immediate desire to establish offices in the country as they are keen to maintain good relations with local firms. As Odubeko notes: ‘We don’t necessarily want to be competing with the local firms and we see nearly all of the RFPs [requests for proposals] for the big transaction financing in Nigeria. How many more we would see by actually being on the ground is debatable.’
At least for the next two years or so, the likes of Osuntokun and other English law firm partners are likely to continue getting on those flights into Nigeria to meet clients and secure instructions – and then promptly head back home.
For more information on joining the Law Society’s international section see the website.
Marialuisa Taddia is a freelance journalist